Ajay Bagga flags bear market in US small-caps even as Donald Trump predicts stock market boom despite tariff turmoil

As US President Donald Trump downplayed Thursday’s brutal stock market crash and promised a booming economy, market expert Ajay Bagga took to social media platform X (formerly Twitter) to offer a contrasting take.

Bagga quoted Trump’s upbeat statement — “I think it’s going very well” — and pointed to the widespread pain across asset classes triggered by the president’s sweeping new tariff proposals.

US stock market and equities globally saw a steep sell-off following Trump’s announcement of a 10% tariff on most US imports, alongside a plan to impose steeper reciprocal tariffs on dozens of countries. The move rekindled fears of a full-blown trade war and a possible global recession.

The Dow Jones Industrial Average tumbled 1,679 points, or 3.98%, while the S&P 500 lost nearly 4.84%. The tech-heavy Nasdaq fared even worse, shedding 5.97% — its steepest one-day fall since March 2020.

Despite the sharp correction, Trump maintained a bullish tone while departing for Florida, claiming, “The markets are going to boom, the stock is going to boom, the country is going to boom.”

But for market watchers like Bagga, the ground reality painted a far more cautious picture. According to him, the damage wasn’t limited to the headline indices.

“The selloff spared almost no corner of the US stock market, but there was one group where the pain was especially acute: small-cap stocks,” Bagga posted on X.

Citing the Russell 2000 Index — which tracks smaller publicly traded companies — Bagga highlighted that it had officially entered a bear market, plunging more than 20% from its all-time high reached in 2021. On Thursday alone, the index slumped 6.6%, outpacing even the biggest names on Wall Street.

Small-cap stocks were once considered among the likely beneficiaries of Trump’s pro-growth policies, especially after his 2016 election win. However, Bagga noted that the current environment, marred by protectionist rhetoric and inflationary risk, has flipped that narrative on its head.

Institutional Exposure

In another post, Bagga referred to fresh data from the National Association of Active Investment Managers, revealing that institutional exposure to US equities has fallen to its lowest level since November 2023.

“Money managers have rolled back exposures to US equities to levels not seen since November 2023, according to a poll by the National Association of Active Investment Managers,” Bagga said.

The selloff, Bagga emphasized, signals a significant shift in sentiment among professional investors, who are now bracing for higher volatility and potential downside risks.

With trillions in market value erased in a single session, investors will now eye the US jobs report to be released on Friday, April 4.

“Investors on Friday morning will focus on the closely watched jobs report for March. Economists polled by Dow Jones expect nonfarm payrolls to rise by 140,000 jobs and the unemployment rate to hold steady at 4.1%. Our estimate is 150,00 jobs and unemployment rate at 4.2%,” Bagga said.

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