Trump says US will 'boom' as markets fall amid recession fears

Wall Street ends lower after volatile day of trading

President Donald Trump and Tesla chief executive Elon Musk outside the White House on Tuesday. AP

President Donald Trump on Tuesday said he does not think the US is headed for a recession as US stock markets continued a dramatic sell-off.

On Sunday, Mr Trump declined to rule out the possibility of a recession and said the US economy faced “a period of transition”. The remarks fuelled frantic selling on Wall Street, further dampening markets that have now given up all the gains they made since the November election.

The President was asked at the White House on Tuesday to clarify whether he thinks there will be a recession. "I don't see it all," he said. "I think this country is going to boom."

Wall Street ended lower after dropping from a small gain to 10 per cent below its record. The volatile trading saw the S&P 500 fall 0.8 per cent, the Dow Jones Industrial Average down 478 points, or 1.1 per cent, while the tech-heavy Nasdaq composite slipped 0.2 per cent, with its losses muted by a rebound for Tesla.

“We are in a situation where the pendulum has shifted and fear has taken over,” said Adam Sarhan, founder of 50 Park Investments. “A lot of this has to do with the ‘Trump trade’ being unwound, but also concerns about growth going forward, and also the R-word, which is recession.”

Equities sentiment has soured rapidly in recent weeks as economists withdraw their expectations for economic growth based on the potential for a trade war.

“A reasonable base case for the US economy is growth trending in a 1.5 per cent – 2 per cent range over the next year or so, down from about 2.5 per cent over the past few years, based on tariff implementation,” Dennis DeBusschere of 22V Research wrote in a note to clients.

At the same time, the mega-cap tech stocks that have largely driven the S&P 500’s more than 50 per cent gain over the past two years are caught in a sell-off, as investors grow doubtful about the immediate future of artificial intelligence and, more broadly, retreat from riskier growth assets.