If the Stock Market is Crashing Out, Should We?

On April 2, “Liberation Day” took place, setting President Donald Trump’s tariff plan into motion. Since taking office, Trump has followed through on his campaign promise to impose tariffs on major countries such as Mexico, Canada and China, aiming to counter “threats to national security and economic stability” and strengthen American industry. 

The outcome of Liberation Day sent the stock market into a panic, with once-strong market indexes plummeting to historic lows overnight. While stockholders worry about their wallets, many everyday Americans remain understandably confused or unfazed. According to the Economic Policy Institute, the wealthiest 10% of households in the U.S. own 85% of all corporate stock, with the top 1% alone holding a whopping 50%. About half of American households do not invest in stocks, instead relying on working wages for income. If half of Americans do not participate in the stock market, and many don’t even understand it, why should they worry about their own pockets? Let’s break it down. 

Starting simply, what are stocks? Stocks are shares that investors can purchase to gain partial ownership of a company and its earnings. The value of a stock is dependent on the company’s value, so the better a company performs, the more its stock is worth. Many invest in stocks as an alternative source of income, thus becoming a part of the stock market, a larger network of investors who buy and sell shares of publicly traded companies. The stock market has indexes that are widely known, reported on by many news stations and websites, that measure the value of companies based on their stock prices. Traders use these indexes to make predictions about future performance and guide their investment decisions.

So, why does all of this matter? While the stock market doesn’t directly impact the everyday income of most Americans, the factors driving its shifts have broader implications for overall economic health. The destructive impact that the recent wave of tariffs had on the stock market is just the beginning of a larger ripple effect set to affect all households. Since many U.S.-based companies use imported materials to manufacture their goods, Trump’s policies force them to pay more for production. To cover these additional costs and maintain profits, companies must raise the prices of their goods, which ultimately hurts American consumers’ pockets. While this correlation does not directly link the everyday citizen to the stock market, it demonstrates that the same dynamics causing the stock market to struggle may also contribute to individual economic hardship.

Similar connections exist between other factors impacting both the stock market and working-class Americans more generally. Interest rates and inflation are the most relevant examples of this phenomenon. When inflation occurs, all products become more expensive and the purchasing power of consumers is reduced. The Federal Reserve combats this by increasing interest rates, which determine the cost of common payments like mortgages, student loans or credit card interest. Higher interest rates make it more difficult for everyday people and businesses to take out and repay loans. Investors consider this dynamic when making financial decisions, and oftentimes, higher inflation and interest rates drive sharper declines in stock market value. Because the stock market responds to the same pressures that consumers face, it reflects what the economy may look like for all Americans. 

In response to criticism following the brief but severe economic damage caused by Liberation Day, the Trump administration placed a temporary 90-day pause on the majority of the initial tariffs. While the market is slowly recovering, it is far from its original strength. Investors remain concerned about the volatile state of the economy, skeptical of the administration’s claims that it is merely part of a larger transition. This uncertainty will undoubtedly influence the stock market. Going forward, it is important to observe fluctuations with caution and curiosity. The strength of the stock market is not the end-all be-all of individual prosperity and success. However, its health is a valuable indicator of broader, more personal factors at play that are worth researching to stay informed and vigilant. 

• economics
• stock market
• Tariffs