Markets Reel as Trump's Reversal Unleashes Unprecedented Volatility

Traders grapple with most volatile equity market in decades after Trump reversal

The global equity market has entered its most volatile phase in decades, with investors struggling to make sense of the sudden and unexpected reversal by US President Donald Trump on the North American Free Trade Agreement (NAFTA) renegotiation.

In a dramatic about-face, Trump announced on Monday that the United States would not re-enter NAFTA, also known as the United States-Mexico-Canada Agreement (USMCA), as previously agreed upon. The move sent shockwaves through financial markets, wiping out billions of dollars in value from global equities and sparking a frenzy of trading activity.

The Dow Jones Industrial Average plummeted by 1.2 per cent, or 245 points, to close at 23,611.42, while the S&P 500 Index fell by 1.3 per cent, or 32 points, to finish at 2,586.57. The technology-heavy Nasdaq Composite Index was hit particularly hard, dropping by 2.2 per cent, or 140 points, to close at 6,665.62.

The volatility was not limited to US markets, as global equities also suffered significant losses. The Stoxx Europe 600 Index fell by 2.1 per cent, while the Nikkei 225 Index in Japan dropped by 2.5 per cent.

The sudden and unexpected nature of Trump's announcement caught many traders off guard, leading to a rush to adjust positions and hedge against potential losses. The move also raised concerns about the stability of the global economy and the potential impact on trade relations between the US and its major trading partners.

"This is a classic example of a Trump tweet-induced shock," said Ian Bremmer, president of the Eurasia Group. "The market was caught off guard, and now everyone is scrambling to adjust their positions and figure out what this means for the economy and trade."

The volatility is expected to continue in the coming days, as investors digest the implications of Trump's decision and wait for further developments. The US Federal Reserve is also scheduled to release its latest interest rate decision on Wednesday, which is likely to add to the market's volatility.

In the meantime, traders are bracing themselves for a potentially wild ride, as the market grapples with the uncertainty and unpredictability of the Trump administration.