---
title: "Dehydrated Research Report | U.S. Stocks Trading \"Stagflation\" or \"Recession\"?"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/27588824.md"
description: "Why have U.S. stocks continued to decline recently, while the consumer and healthcare sectors stand out?"
datetime: "2025-02-26T12:27:08.000Z"
locales:
  - [en](https://longbridge.com/en/topics/27588824.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/27588824.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/27588824.md)
author: "[研報dog](https://longbridge.com/en/profiles/16445440.md)"
---

# Dehydrated Research Report | U.S. Stocks Trading "Stagflation" or "Recession"?

**U.S. stocks have fallen for four consecutive trading days, driven by a combination of macroeconomic, microeconomic, and policy factors, leading to liquidity and position shocks.**

From February 20 to 25 (last Thursday to this Tuesday), the S&P 500 and Nasdaq fell consecutively, with cumulative declines of 3.1% and 5.1%, respectively; the Dow Jones fell last week but turned up this week.

**Macro-wise**, weak economic data has been released intensively, igniting expectations of economic slowdown or even recession;

**Micro-wise**, leading consumer company Walmart's earnings report fell short of expectations, pointing to a pessimistic outlook for consumption;

**Policy-wise**, externally, Trump reiterated tariffs and issued a memorandum on the "America First Investment Policy"; internally, government reforms and spending cuts are in full swing, raising market concerns.

### **This "panic" decline in U.S. stocks has three main characteristics:**

**First**, Chinese concept stocks performed relatively well. On February 25, the Nasdaq Golden Dragon China Index and the Wind China Concept Technology Leaders Index rose, contrasting with the continuously declining Nasdaq.

**Second**, the defensive consumer staples sector rose. In the last four trading days, among the S&P 500 primary industry sectors, **consumer staples rose 1.8%, performing the best**; consumer discretionary and information technology fell 5.5% and 5.2%, respectively, performing the worst. After experiencing a decline last week, the Dow Jones stabilized first this week.

**Third**, the U.S. dollar and U.S. Treasury yields declined. Since mid-January, the U.S. dollar and Treasury yields have been falling, with market expectations of "economic overheating" shifting to concerns about potential economic recession.

### What is the market trading?

**From the performance of U.S. stocks alone, it seems like trading "stagflation," but combined with the trends of the U.S. dollar and Treasury yields, it resembles trading "recession."**

**First**, concerns about a slowdown in the U.S. economy are rising, with signals of weakening consumption being released: Walmart's performance guidance is "bleak"; the Conference Board Consumer Confidence Index and the Michigan Consumer Sentiment Index plummeted in February; the preliminary February Markit Services PMI was 49.7, significantly below the expected 53; January's U.S. retail sales saw the largest month-on-month decline in two years. The Atlanta Fed's GDPNow model significantly revised the first-quarter economic growth rate down from 3.9% to 2.9% on February 5, and further down to 2.3% on February 14.

**Second**, tariff expectations have fluctuated. Due to the limited implementation of Trump's tariff policies since taking office, which were not as aggressive as his campaign promises, the market seemed to temporarily "breathe a sigh of relief"; however, recently Trump has reiterated that the 25% tariff plan on Canada and Mexico will take effect on March 4, restarted the investigation into the digital services tax, and issued the "America First Investment Policy" memorandum, returning to a hardline stance.

**Finally**, the "tight fiscal tendency" of Trump and Treasury Secretary Mnuchin is taking shape, and the unresolved debt ceiling issue limits fiscal expansion.

Whether it is "stagflation" or "recession" is currently difficult to conclude, what are the follow-up focus points?

Geopolitically, how will the three "presidential memorandums" play out: the **"America First Trade Policy"** issued on January 20, the **"Reciprocal Trade and Tariffs"** memorandum issued on February 13, and the **"America First Investment Policy"** presidential memorandum issued on February 21 The "presidential memorandum" does not directly issue policies like an executive order, but aims to instruct relevant departments (such as the Department of Commerce, the Office of the Trade Representative, the Department of the Treasury, etc.) to initiate investigations and requires timely submission of results reports, with subsequent policies to be released based on the investigation results; therefore, the consequences of the "memorandum" can be light or heavy, leaving room for negotiation.

Federal Reserve, March FOMC economic outlook. The market expectation for no interest rate cut in March is close to 100%, and attention should be paid to the dot plot and quarterly economic forecasts, whether the Federal Reserve will adjust GDP and inflation forecasts.

Risk warning: Trump's policies exceed expectations, and changes in the U.S. economic fundamentals exceed expectations. $NASDAQ Composite Index(.IXIC.US)$S&P 500(.SPX.US)

Minsheng Securities

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