According to Zhitong Finance APP, the U.S. stock market has fallen into a correction zone for the first time in over a year. The current question is whether the decline in the stock market will further intensify.
As of Thursday's close, the benchmark S&amp;P 500 index has dropped more than 10% from its peak on February 19, meeting the widely used definition of a correction. Previously, the tech-heavy Nasdaq Composite Index also experienced a similar decline, entering the correction zone last week.
This drop has caused the market capitalization of the S&amp;P 500 index to evaporate by about $5 trillion from its February peak, marking a sharp shift in market sentiment compared to the beginning of the year when Wall Street was largely cheering for most of Trump's agenda. The last correction for this index occurred at the end of 2023.
The following chart shows the recent performance of the U.S. stock market and the key situations investors may face.
U.S. Stocks Enter Correction Zone
Corrections in the U.S. stock market are quite common. According to Yardeni Research, the S&amp;P 500 index has experienced 56 corrections since 1929.
Data shows that only 22 of these corrections have entered bear markets, defined as a decline of 20% or more from recent historical highs.
If the correction does not evolve into a bear market, the damage to the market will be much smaller.
Data indicates that since 1929, corrections have led to an average peak-to-trough decline of 13.8%, while the average decline during bear markets is 35.6%.
However, investors can gradually re-enter the market. According to Yardeni Research, the average duration of a correction is 115 days. The current correction has lasted for 22 days.
Occurrences of S&amp;P 500 Index Corrections and Bear Markets
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Tariff Policies Hit Risk Assets Hard
The Trump administration's repeated tariff measures against major trading partners such as Canada and Mexico have severely impacted investors' interest in high-risk assets.
Investors and analysts are concerned that the escalating trade tensions may exacerbate inflationary pressures in the U.S. and potentially hinder economic growth, increasing the risk of an economic recession.
The uncertainty surrounding tariffs has left investors anxious and raised concerns about the so-called &#34;Trump put option.&#34; The &#34;Trump put option&#34; refers to investors' belief that the Trump administration will boost the stock market through policy adjustments during significant market declines, thus providing a form of protection similar to a &#34;put option.&#34;
Tariff Policies Impacting U.S. Stocks
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Safe-Haven Assets Become Popular
Investors have turned to various traditional safe-haven assets in preparation for further market turbulence.
Due to Japan's substantial net overseas assets and historically low interest rates, the yen has long been viewed as a safe-haven currency. Since the beginning of this year, the yen has appreciated by 6.5%, while the dollar has faced widespread selling
Gold prices, seen as a tool to hedge against uncertainty, hit a record high on Thursday, rising over 13% this year.
The increasing risk of a stagnant U.S. economy has prompted investors to buy safer U.S. Treasury bonds. The rise in bond prices has pushed the yield on the benchmark 10-year U.S. Treasury down to 4.296%, a decline of about 50 basis points since mid-January.
Even in the stock market, investors are leaning towards lower-risk sectors, with healthcare and consumer staples in the S&amp;P 500 rising 4.5% and 1.3% respectively this year.
Investors flock to safe-haven assets
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Increased Uncertainty
The erratic policies of Trump have heightened uncertainty for businesses, consumers, and investors, leading to a surge in cautious sentiment.
The U.S. Economic Policy Uncertainty Index recently surged to its highest level since July 2024. This index analyzes newspaper articles containing keywords related to economic and policy uncertainty, as well as changes in tax laws and other economic data.
The rise in policy uncertainty is detrimental not only to the stock market but also to business investment and consumer spending.
Delta Air Lines (DAL.US) cut its first-quarter profit forecast by half on Monday, with its CEO stating that the environment has weakened due to uncertainty in the U.S. economy.
Increased uncertainty in U.S. economic policy
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Pessimism Prevails
The latest sentiment survey from the American Association of Individual Investors (AAII) shows that individual investors' pessimism about the short-term outlook for the U.S. stock market has reached its highest level in over two years.
As investor sentiment shifts, institutional investors have significantly reduced their stock allocations. Analysts at Deutsche Bank stated on Friday that investors' stock positions have fallen to a slight underweight for the first time since August of last year.
Meanwhile, the Chicago Board Options Exchange Volatility Index (VIX) surged to a seven-month high of 29.57, while its long-term median is 17.6. The VIX is an options indicator that measures the demand for hedging against market downturns.
Pessimism intensifies sharply
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The &#34;Seven Giants&#34; No Longer Shine
The &#34;Seven Giants,&#34; which led the market rally for most of the past two years, have essentially fallen into a rut in 2025.
As investors grow increasingly risk-averse and seek safer investments, these tech and growth giants have seen declines greater than the broader market.
Since the S&amp;P 500 peaked on February 19, the average decline for the &#34;Seven Giants&#34; stocks has been about 17%, with Tesla (TSLA.US) dropping approximately 33%
As investors reduce their investments in these previously strong-performing stocks, this adjustment may drive market leadership to shift towards other sectors.
The &#34;Seven Giants&#34; have performed poorly in stock prices this year.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250314/1741920236236076.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250314/1741920236236076.png"/>

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The U.S. stock market has fallen into a correction zone for the first time, with the S&P 500 index down more than 10% from its February peak. Market sentiment has shifted dramatically, with approximately $5 trillion in market value evaporated. Corrections are relatively common in history, with an average decline of 13.8%, while bear markets see a decline of 35.6%. Investors are concerned that escalating trade tensions may exacerbate inflationary pressures, potentially impacting economic growth. The current correction has lasted for 22 days, while the historical average correction period is 115 days

- The U.S. stock market has entered a correction phase for the first time in over a year, with the S&P 500 index down more than 10% from its February 19 peak.  
- This decline has erased approximately $5 trillion in market value, reflecting a significant shift in investor sentiment amid rising trade tensions and economic uncertainty.  
- As investors seek safer assets, traditional hedges like gold and the yen have gained popularity, while the volatility index (VIX) has surged, indicating heightened market anxiety.

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U.S. stocks fall into a correction, is the next step a bear market? Six charts reveal key signals in the market