Trump tariffs: Panic mode for investors or a hidden opportunity like before? Experts weigh in

US President Donald Trump's recent implementation of reciprocal tariffs has struck a significant blow to global stock markets. Effective as of Wednesday, these tariffs impose a minimum of 10% on nearly all US trading partners, with steeper rates targeting countries with a trade surplus with the US.

The tariffs, announced on April 2, have led to a market correction in stock markets worldwide, with the US experiencing a fourth consecutive day of declines. The S&P 500 index closed below 5,000 for the first time in nearly a year, now standing 19% below its high from February 19, highlighting the extent of the market's downturn.

Amid this turmoil, the S&P 500 companies have collectively lost $5.8 trillion in market value over the past week. Asian markets have not been spared, with broad sell-offs observed in Japan's Nikkei and India's Sensex. In India, the BSE Sensex fell by 403 points, or 0.54%, to 73,823, while the Nifty50 lost 146 points, or 0.65%, dropping to 22,389.

While market corrections can be healthy and attract fresh investors, analysts caution that a broad-based sell-off triggered by a sudden event could spark panic selling and extend a risk-off sentiment.

CA A K Mandhan shared a post on the social media platform X, demonstrating the resilience of markets in recovering from significant events.

Though healthy corrections can reset valuations and invite new investors, analysts have warned that this could turn into a crisis.  

Analysts stated that the extensive market sell-off is drawing comparisons to previous global financial crises, such as the 2008 financial meltdown and the 2020 COVID-19 pandemic.

Analysts of brokerage Nuvama have noted that in the days following the tariffs, the S&P 500 and oil have both dropped by 10%, while US high-yield bond spreads have widened by 75–100 basis points. Experts caution that if these conditions persist unchecked, the reflexivity of asset classes could precipitate a financial crisis, given the current fragility of the global economy and the US private sector.

Despite the severe market fluctuations, financial experts urge investors not to panic. Investment strategies are shifting focus to sectors with less cyclical demand, such as fast-moving consumer goods (FMCG), cement, telecom, and private banks, which are seen as less vulnerable to volatile market conditions.