United States: S&P 500 Heads Toward Worst Quarter Since 2022

By Chibuike Oguh

The American stock market index S&P 500 is set to close its worst quarter in four years this Tuesday, reflecting investors’ caution about a resurgence of inflation, uncertainties in the Middle East, and the impact of artificial intelligence (AI).

The benchmark index of the 500 largest publicly traded companies in the United States is expected to drop by about 7% in the first quarter of 2026, its worst performance since 2022, a year when it was significantly affected by the Russo-Ukrainian conflict and the repercussions of the COVID-19 pandemic.

Investor concerns have intensified in recent weeks with the rise in yields of U.S. Treasury bonds, after a period of stability at the beginning of the first quarter. Investors, who were still anticipating a rate cut at the beginning of the year, are now hesitant, fearing a tightening of the U.S. Federal Reserve’s monetary policy to contain any inflation resurgence due to rising energy prices.

The yield on 10-year U.S. bonds fell by 10.4 basis points on Monday to settle at 4.336%, after hitting 4.50% last week for the first time since the beginning of the year. Long-term U.S. Treasury debt ETFs are down by about 1% since the beginning of the year.

“This year, concerns about interest rate developments have multiplied,” said Matt Orton, chief market strategist at Raymond James.

“Inflation has been more of a drag than in recent years, fueling concerns about the impact of rising energy prices on the U.S. and global economy,” he continued.

Investor fears about potential disruptions in the software sector with the rise of AI and the staggering amount of spending on this technology have contributed to the significant decline in the “tech” sector since the beginning of the year.

All companies composing the “Magnificent Seven” (MAG-7) group – Nvidia, Apple, Alphabet, Meta, Microsoft, Amazon, and Tesla – are down in the stock market for the quarter. Microsoft and Tesla even show losses exceeding 20%.

“The story about the AI disruption has begun to affect the values of the MAG-7, then spread to financial and cybersecurity values,” explained Chris Galipeau, market strategist at Franklin Templeton Institute.

Fears about the private credit market have also spread to the stock markets, with several major funds imposing limits on withdrawals, which, for some observers, evoked memories of the early stages of the 2008 financial crisis.

“Before the war, the two main market challenges were the disruption related to AI and private credit,” noted James Ragan, co-director of investments at DA Davidson, emphasizing that this threat remains present.

“Venture capital companies are the most exposed, and banks are also vulnerable, but we still do not fully understand their exposure. Losses are expected in these credit markets,” he added.

Tariffs imposed by U.S. President Donald Trump against the United States’ major trading partners have also been a major source of market volatility, according to Bill Strazzullo, chief market strategist at Bell Curve Trading.

“We are in a major market process and we are only at the beginning. We should not be thinking about buying. We should focus on preserving our gains,” he warned.

(Reporting by Chibuike Oguh in New York; French version by Claude Chendjou, edited by Augustin Turpin)