MW U.S. stocks had a rocky February under Trump's return. Should investors be worried about March?

By Isabel Wang

A stormy February isn't abnormal - but concerns over economic growth and tariffs may not clear until late March, say market analysts

February - the shortest month of the year - felt anything but brief as heightened macro uncertainty gripped Wall Street, with seemingly endless twists and turns on the U.S. stock market.

Despite rising sharply on Friday, U.S. stocks wrapped up February on a grim note. Tumbling nearly 4% last month, the tech-heavy Nasdaq Composite COMP suffered its biggest monthly decline since April 2024. The S&P 500 SPX and the Dow Jones Industrial Average DJIA were each off around 1.5%, logging their worst month since December, according to Dow Jones Market Data.

History shows, however, that investors shouldn't get too spooked by the selloff. February has been one of the worst months of the year in terms of stock-market performance, especially in a postelection year.

Since 1950, February, on average, has delivered a 1.3% monthly decline for the large-cap S&P 500 index in the years following U.S. presidential elections, according to Ryan Detrick, chief market strategist at Carson Group (see chart below).

Taking it a step further, the second half of February tends to be one of the weakest parts of the month, Detrick told MarketWatch on Friday. "So to see some volatility like we have been isn't a surprise," he said.

Indeed, much of the stock market's decline in February came down to the final week alone. The Nasdaq tumbled 3.5% and the S&P 500 fell nearly 1% for the week after concerns over slowing economic growth, President Donald Trump's tariff plans and rising geopolitical risks put Wall Street on edge.

See: Jobless claims may have just fired the clearest recession warning yet - here's why investors should be worried

Consumer confidence sank to an 8-month low in February, due in part to concerns about the potential negative economic impacts of Trump's policies. The Atlanta Fed's GDP Now measure, which tracks economic data in real time and adjusts continuously, adjusted to forecast first-quarter output falling by 1.5%. This would be the first quarterly contraction for the U.S. economy since early 2022.

Meanwhile, worries around Trump's tariff policies toward major U.S. trading partners also unleashed turmoil in the financial markets. The president said that 25% tariffs on Canada and Mexico are still on track to go into place on Tuesday, March 4, and added that his administration would slap an additional 10% levy on China, on top of a 10% tariff already imposed on Chinese imports earlier last month.

And the storm kept brewing. On Friday, a fresh wave of volatility briefly rattled the stock market as a tense exchange between Trump and Ukrainian President Volodymyr Zelensky dashed hopes for a Ukraine-Russia peace deal. However, U.S. stocks quickly recovered their losses to finish Friday's session higher.

See: Trump's 'World War III' warning to Zelensky rattled stocks. Why they quickly recovered.

"There are always worries and concerns [on the stock market], and 2025 isn't anything new," Detrick said. "Tariffs, a growth scare and geopolitical worries all dominate the headlines lately and have many investors on edge. The reality though is our economy is still on firm footing and we think the worries are once again overblown."

Fear was running high among stock-market investors in February. In Detrick's view, the latest AAII survey - which showed that bearish sentiment was at one of the highest levels ever - suggests that market expectations are quite low. "That's a good thing, as it is much easier to clear a lowered bar [in order for stocks to bounce back]," he noted.

Now the question is how a weak February sets the stage for this next month. The good news is that as bad as February has been for stocks historically, March and April have been two of the better months of the year, Detrick said.

History says the S&P 500 has scored an average return of nearly 1.2% in March and finished higher 65% of the time dating back to 1945, according to Sam Stovall, chief investment strategist at CFRA Research (see chart below).

However, in those years when the stock market was up in January but fell in February, the S&P 500 has gained an average of only 0.5% in March, he added.

Stovall said investors may not gain more clarity on the actual progress of stagflation and Trump's tariff plans - two of the major concerns weighing on market sentiment - until the end of March.

"We are just going to have to wait and see additional CPI and PPI data in March, and whether they show [inflation] ends up resuming," Stovall told MarketWatch in a phone interview on Friday. He added that since Trump has used tariffs as leverage to exert economic pressure on the U.S.'s top trading partners, the actual impact and staying power of those tariffs "won't be clear until the end of the month, maybe even into April."

See: Will consumers' gloomy outlook take the bloom off the stock market?

U.S. stocks finished higher on Friday - the last day of February - to wrap up a volatile week and a losing month on Wall Street. The Dow rose over 600 points, or 1.4%, on Friday, while the S&P 500 and the Nasdaq each surged around 1.6%, according to FactSet data.

-Isabel Wang

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March 01, 2025 07:00 ET (12:00 GMT)

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