‘Don't catch a falling knife’

Are we heading for another 2008? Karl Matchett looks into the context behind the 7 trillion stock market collapse

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Stock markets have continued to fall across the globe in the wake of US tariff announcements last week, and now retaliation measures have started to emerge, with China among the first to respond and the EU expected to make a statement imminently.

The combination of higher costs, fewer orders for businesses and punitive hits on US exporters all means worldwide growth could well slow significantly, with some economists now foreseeing a chance of global recession.

Ongoing uncertainty around the entire situation means there’s no guarantee of an answer, and yet the question remains: how much worse could it get in the stock markets?

Context in the UK and abroad

The FTSE 100 was down more than 3 per cent again in Monday trading – meaning it more than erased earlier 2025 gains and was back to price levels last seen a year ago. That’s clearly a significant drop-off, but it is far from catastrophic in overall stock market terms: the FTSE 100 was at a record level, an alltime high, on 3 March.

So in the wider context of stock market history, the index is hardly in dismal territory. Similarly, in Germany the DAX was down 13 per cent in a month, yet it’s still only back to December 2024 levels now, while the S&P 500 was around April 2024 levels.

Still, recovery can take time so investors and companies don’t want to see sustained drops without certainty of how to mitigate those. Further afield it’s a different matter.

Hong Kong’s Hang Seng dropped more than 13 per cent yesterday and Japan’s Nikkei 225 fall of more than 7 per cent was extremely notable; following enormous growth from 2021 to 2024, the Nikkei is down more than 20 per cent over the past year – and for the Hang Seng it was one of the worst days in its existence.