U.S. Stocks Suffered a Rocky February. Should Investors Be Worried About March?

February, the shortest month of the year, felt unusually long for Wall Street as investors navigated persistent macroeconomic uncertainties and market fluctuations. Despite a strong rebound on the last trading day of the month, U.S. stocks still closed February on a sour note, with significant losses across major indexes.

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The Nasdaq Composite, heavily weighted toward technology stocks, dropped nearly 4% in February, marking its steepest monthly decline since April 2024. Meanwhile, the S&P 500 and the Dow Jones Industrial Average both lost approximately 1.5%, making it their worst performance since December, according to Dow Jones Market Data.

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Historical trends suggest investors shouldn’t be overly alarmed by the downturn. February has traditionally been a weak month for the stock market, especially in the year following a U.S. presidential election. Since 1950, the S&P 500 has averaged a 1.3% monthly decline in post-election years, according to Ryan Detrick, chief market strategist at Carson Group.

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Detrick also pointed out that the second half of February is historically one of the weakest periods of the month. “Given past trends, the volatility we’ve seen isn’t surprising,” he said. Indeed, much of February’s losses were concentrated in the final week. During that period, the Nasdaq dropped 3.5%, while the S&P 500 fell nearly 1%. Concerns over slowing economic growth, President Donald Trump’s tariff policies, and rising geopolitical tensions weighed heavily on investor sentiment.

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Consumer confidence also took a hit, reaching an eight-month low in February, partly due to worries about the economic effects of Trump’s trade policies. The Atlanta Federal Reserve’s GDP Now model, which continuously updates its economic growth projections based on incoming data, revised its first-quarter GDP forecast downward to a 1.5% contraction. If this forecast holds, it would mark the first quarterly decline in U.S. economic output since early 2022.

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Adding to market jitters, Trump reaffirmed his stance on tariffs, announcing that 25% tariffs on Canadian and Mexican imports would take effect on March 4. He also signaled an additional 10% levy on Chinese goods, building on an earlier 10% tariff imposed in January. These trade measures fueled uncertainty among investors, particularly regarding potential disruptions to global supply chains.

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Further turbulence hit the market on Friday when a tense exchange between Trump and Ukrainian President Volodymyr Zelensky cast doubt on prospects for a peace deal between Ukraine and Russia. However, U.S. stocks quickly rebounded, erasing earlier losses and closing higher for the day.

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Despite the prevailing concerns, Detrick believes the market’s fears may be overstated. “Every year brings its own set of challenges, and 2025 is no exception,” he said. “While issues like tariffs, economic slowdown fears, and geopolitical uncertainties dominate headlines, the broader U.S. economy remains on solid ground.” He noted that bearish sentiment among investors, as reflected in the latest AAII (American Association of Individual Investors) survey, suggests that expectations are already low, making it easier for stocks to surprise to the upside.

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With February’s struggles behind, investors are now looking ahead to March. Historically, while February has been a weak month for stocks, March and April have tended to perform better. According to Sam Stovall, chief investment strategist at CFRA Research, the S&P 500 has historically delivered an average return of 1.2% in March, posting gains 65% of the time since 1945.

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However, Stovall cautioned that in years when the stock market rose in January but declined in February, March’s average gain has been just 0.5%. He also noted that key market uncertainties, such as stagflation concerns and the full impact of Trump’s tariffs, may not become clearer until the end of March. “We’ll have to wait for additional CPI (Consumer Price Index) and PPI (Producer Price Index) data next month to see if inflation resumes its upward trend,” Stovall said. He added that the true effects of Trump’s tariffs on U.S. trading partners might not be fully understood until April.

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Despite February’s turbulence, U.S. stocks closed the month on a positive note. The Dow Jones Industrial Average climbed over 600 points, or 1.4%, on the final trading day, while the S&P 500 and the Nasdaq each advanced around 1.6%, according to FactSet data. Investors will now shift their focus to upcoming economic data and policy developments, hoping for a clearer picture of where the market is headed in the months ahead.

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