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How much damage was done? Understanding the scale of the latest market sell-off
Koen Hoorelbeke
Investment and Options Strategist
Summary: The recent 17.6% drop in the S&P 500 marks one of the sharpest and broadest sell-offs since the pandemic, erasing over $6 trillion in U.S. market value in just days. While panic signals like the VIX spike are flashing, historical data suggests the bottom may still be ahead, not behind us.
How much damage was done? Understanding the scale of the latest market sell-off
A sharp shock, but not without precedent
In just a few trading days, U.S. equity markets experienced one of their sharpest drawdowns since the pandemic era. The S&P 500 has now fallen 17.6% from its February 19 record high of 6,144.15, closing at 5,062.25 on April 7. This includes a historic three-day drop of 10.73%, the steepest since March 2020.
Over $6.6 trillion in U.S. market value was wiped out in just two sessions (April 4–5)—the largest two-day loss in history. Globally, more than $10 trillion in equity value has evaporated, equivalent to half the EU’s GDP.
The headlines came fast: trade war escalation, policy tensions, fears of recession. For many investors, the question isn’t just “what happened?”—it’s “how bad is it?” This article looks at the scale and structure of the recent sell-off and offers historical context for long-term investors trying to make sense of it all.
Measuring the magnitude: more than a blip
This wasn’t just a routine correction:
- The S&P 500 is down 17.6% from its February high.
- $6.1 trillion in U.S. equity value has been erased since April 4, according to Bloomberg.
- $10 trillion in global losses make this a worldwide repricing event.
- The Nasdaq 100 has dropped over 22%, while the Russell 2000 has plunged 25%—confirming a bear market for small caps.
- The “Magnificent Seven” tech stocks lost €1.5 trillion in three days, with Apple alone down $500 billion.
While headlines focused on tariffs, these numbers reflect something broader: an aggressive global reset of risk across asset classes and geographies.
What triggered the decline?
This wasn't a single-issue sell-off. Several factors converged:
1. China’s retaliation
The immediate spark was Beijing’s announcement of 34% tariffs on all U.S. imports, along with export controls on rare earths. This came in response to the most aggressive round of U.S. tariffs in over a century.
2. Fears of broader trade war escalation
Investors are also watching for a potential EU response, which could further pressure global supply chains and corporate margins. New import duties on French and German goods are already being priced into risk models.
3. Policy friction in the U.S.
Tensions between former President Trump and Fed Chair Powell have added an unpredictable layer of political risk. The Fed’s ability to respond to macro shocks could become constrained if credibility or independence comes into question.
4. Poor positioning and thin liquidity
Many portfolios entered April under-hedged. When the news cycle turned, low liquidity and fast-money selling compounded the declines. Volatility-linked products and algorithmic trading accelerated the losses.
How this sell-off compares to past events
While sharp, this event is notable not just for the depth but the speed of the drawdown. Here's a comparative snapshot:
| Event | S&P 500 Peak-to-Trough | Duration | VIX Peak |
|---|---|---|---|
| COVID crash (2020) | –34% | 1 month | 85.5 |
| October 2022 bottom | –25% | 10 months | 34.9 |
| Banking crisis (Mar 2023) | –9% | 3 weeks | 29.4 |
| Current drawdown (Apr 2025) | –17.6% | ~7 weeks (ongoing) | 60.0 intraday / 46.98 close |
Notably, the S&P 500’s three-day drop of 10.73% is one of the sharpest ever recorded, eclipsing moves seen during the 2008 financial crisis and rivaling the early COVID-19 shock.
Sectors and assets hit the hardest
Damage was market-wide, but several sectors and segments bore the brunt:
- Technology (XLK): The "Magnificent Seven" shed more than €1.5 trillion, led by Apple, Amazon, and Nvidia.
- Energy (XLE): Repricing of global growth has undercut oil demand expectations.
- Financials (XLF): Banks face a dual hit from falling yields and rising recession risk.
- Small caps (Russell 2000): The index has entered a confirmed bear market, now down over 25% from its November peak.
Even traditionally defensive sectors such as staples and utilities failed to provide meaningful protection. The combination of rate volatility, earnings risk, and geopolitical instability created a broad-based flight to cash.
Is the worst over? Possibly not yet
While panic indicators like the VIX spike and market breadth extremes suggest high stress, they don't necessarily signal a bottom:
- Volatility spikes are often early signals in prolonged downturns. In 2001, 2008, and 2015, initial VIX jumps occurred 22+ weeks before market lows.
- Correlations are not yet extreme: Current S&P 500 pairwise correlations are up, but haven't hit levels consistent with true capitulation.
- Valuations remain elevated: The S&P’s forward P/E is still above 18x, far from the historical bottoms closer to 15x—or even lower in recessionary cycles.
- Earnings expectations remain high: Forecasts for double-digit EPS growth in 2H25 may be unrealistic, artificially inflating valuation multiples.
The data suggests stress is high—but confirmation of a bottom remains absent.
What long-term investors can take away
This selloff, like others before it, reminds investors that market shocks unfold quickly, but recovery takes time. Volatility is emotionally taxing but structurally normal—especially when macro regimes shift.
This is a moment to:
- Review risk allocation, especially to growth-sensitive and globally exposed sectors.
- Rebalance gradually and avoid reactionary trades.
- Reconfirm investment timelines: the news cycle is short, but investment horizons shouldn’t be.
Final thought
The past two weeks have been among the most violent since the 2020 crash. While VIX may eventually cool, volatility often persists, especially when macro risks remain unresolved. This isn’t about one bad day—it’s about a regime shift.
Markets may ultimately stabilize—but clarity on policy, earnings, and valuations is needed first. Until then, prepare for noise, watch for overreaction, and stay focused on fundamentals.
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