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After another tumultuous day for stocks, the S&P 500 is once again knocking on the door of bear market territory—but it hasn’t crossed the threshold just yet.
The SPDR S&P 500 ETF Trust (SPY) dropped 19% from its all-time closing high to Tuesday's close, just shy of the 20% drawdown typically used to define a bear market.
On an intraday basis, SPY did dip more than 20% from its highs on Monday on Tuesday, but most market watchers aren’t calling it official without a close below that line.
QQQ Officially Enters Bear Market
Another widely-followed stock market benchmark, the Dow Jones Industrial Average, hasn't quite entered bear market territory, either. The SPDR Dow Jones Industrial Average ETF Trust (DIA) closed 16.5% below its highs on Tuesday.
The Nasdaq-100, however, has already fallen into the bear’s grasp.
The Invesco QQQ Trust (QQQ), which tracks the tech-heavy index, was down 21.5% from its all-time closing high at Monday’s close, marking its first official bear market since 2022.
Source: etf.com data
However, this selloff looks quite different from the last one. Back in 2022, inflation was surging, interest rates were rising and markets were digesting the aftermath of pandemic-era supply chain chaos.
This time, the trigger is far more direct: President Donald Trump’s sweeping "reciprocal tariffs," which have upended investor sentiment and stoked fears of an all-out trade war.
In the last bear market, the S&P 500 ultimately dropped more than 25% from peak to trough, while the Nasdaq fell nearly 36%. Whether this downturn follows the same path remains to be seen.
Bulls Hold Out Hope
Some investors still hold out hope that the S&P 500 will avoid entering a full-blown bear market. Unlike past drawdowns driven by entrenched macroeconomic forces, this one is largely the result of political decision-making.
If President Trump walks back his tariff threats, markets could breathe a sigh of relief. But if tensions escalate or if the economic cracks start to widen, a deeper selloff may be hard to avoid.
For now, all eyes are on Washington, D.C.