The S&P/ASX 200 Index (ASX: XJO) is getting hammered today.
After closing up 0.2% to 7,962.3 points on Monday, the benchmark Aussie index is down 1.2% in morning trade on Tuesday at 7,871.0 points.
ASX tech stocks are doing it even tougher, as witnessed by the 2.8% decline in the S&P/ASX All Technology Index (ASX: XTX).
As for the biggest three stocks on the ASX 200 by market cap, Commonwealth Bank of Australia (ASX: CBA) shares are down 2.0%, the BHP Group Ltd (ASX: BHP) share price is up 0.1%, and CSL Ltd (ASX: CSL) shares are down 0.1%.
Here's what's going on.
ASX 200 shaken by recession fears
On the heels of a rather tepid earnings season, the ASX 200 is under renewed pressure today following heavy overnight losses in United States' stock markets.
By the time the smoke cleared and investors hung up their hats for the day, the S&P 500 Index (SP: .INX) was down 2.7%. And US tech stocks fared even worse, with the Nasdaq Composite Index (NASDAQ: .IXIC) shedding US$1.1 trillion in value over the day after tumbling 4.0%.
Shares in artificial intelligence (AI) chipmaker Nvidia Corporation (NASDAQ: NVDA) closed down 5.1%, while Elon Musk's EV giant Tesla Inc (NASDAQ: TSLA) plunged 15.4%.
US stocks and the ASX 200 are catching significant headwinds amid fears the world's largest economy is heading for a recession. These fears were fuelled after US President Donald Trump cautioned Americans they could be in for a 'period of transition' amid widening global tariff targets.
Major government spending cuts are underway in the US, and a big shift in the nation's geopolitical strategies is also raising investor angst.
What are the experts saying?
"Locally, the market continues to look uncertain," Josh Gilbert, market analyst at eToro, said. "Our largest trading partner, China, is at the centre of the tariffs whilst the region slipped back into deflationary territory over the weekend."
Commenting on the big retrace in US stock markets that's dragging on the ASX 200 today, Michael Rosen, chief investment officer at Angeles Investment Advisors, said (quoted by Bloomberg):
It took a few weeks for Trump to break the international economic regime, presumably with a plan to fix and replace it with something 'better.' Absent a clear idea of what 'better' is, investors are just left with the detritus of the broken global economic framework. Unless and until we see what replaces it, investors will be cautious, at best.
Andrew Tyler, head of global market intelligence at JPMorgan Chase & Co, believes US investors, and, by connection, ASX 200 investors, should brace for more market swings ahead.
According to Tyler:
We do think a rebound is more likely than another immediate decline. While the market took solace in [Fed chair Jerome] Powell's commentary, more tariffs are coming and we do not believe that the market can look through these tariffs scheduled for April 2, which may include a global tariff.
Ari Wald, senior analyst at Oppenheimer, is keeping a close eye on the small-cap space for signs of a sustained rebound.
"We're unsure about any sustainability in a relief rally that may come for the S&P because small caps are still getting pummelled," Wald said. "Small caps need to bottom to give an all-clear for the broader market."
