Today’s Stock Market: Another Great Depression or a Massive Overreaction?

We are living through one of the most violent stock market climates in modern history…

• From late February into early March, we dropped 10% in just 20 trading days – one of the fastest corrections ever recorded.
• Then, after President Trump’s “Liberation Day” tariff shock, we fell another 10% in two days; something that’s happened only a handful of times in the past 100 years.
• We followed that up with a historic 8% rally on news of a 90-day tariff pause – some of the biggest single-day gains ever…
• Only to see the market crater again the very next day, giving back more than 3.5% as traders called the pause “signal over substance.”
• Meanwhile, the volatility index (VIX) – the market’s fear gauge – has more than doubled, now hovering at levels we’ve seen only twice before in history: once during the 2008 financial crisis and once during 2020’s COVID-19 lockdowns.

This isn’t your average market pullback. This is whiplash with a capital W.

And it puts us in rare company. Historically, this kind of price action has only happened four other times – during the Great Depression, the start of World War II, 2008’s global financial crisis, and 2020’s COVID crash.

Today’s stock market mayhem is reminiscent of some major historical crashes.

But are we actually staring down the barrel of a crisis like that?

Comparing History

The market’s price action is screaming: “Brace yourself. Something catastrophic is about to happen.”

But does this look like the Great Depression? Not really. 

Yes, the 1930s crash was worsened by a significant tariff package – Smoot-Hawley – that increased the average tariff rate from 13.5% to nearly 20%, triggering a global trade war. That comparison is real.

But in the ‘30s, unemployment was above 20%. Bank failures were happening on a weekly basis. Industrial production collapsed. And there was no central bank with the tools to backstop the financial system.

Today, unemployment is low, near 4%. Banks are relatively healthy. The U.S. Federal Reserve has stockpiled liquidity firepower. And the economy, though cooling, is not collapsing.

So, no, we don’t believe we’re in a tailspin toward 1930s America.

What about World War II? We don’t see that parallel, either. 

Yes, global geopolitical tensions are high. The U.S.-China dynamic is fraught. The Middle East is tense, and Russia and Ukraine remain locked in conflict.

But that’s been true for a while. And while global conflict risk is real, there is no indication that we are on the verge of a world-war-scale military event.

Serious concerns, yes – but not like 1939.

How about the 2008 financial crisis?

At that time, we were dealing with a broken financial system. The banks were loaded with toxic assets. Liquidity evaporated. The entire system teetered on the edge.

But right now, there’s no Lehman, Bear Stearns, or AIG collapse. There hasn’t been a sudden disappearance of trust in overnight lending.

Instead, this is a policy-driven, market-manufactured panic.

The Stock Market Isn’t Facing a Black Swan

And that brings us to the COVID era… which, in our view, bears almost no similarities to what we’re experiencing today. 

We’re not locking down economies, shutting borders, or freezing global supply chains in an instant.

We’re still working, living, and traveling. 

COVID-19 was a black swan health crisis. And this is not that.

This is a classic market overreaction to a real but overstated fear – tariffs and an ensuing trade war.

Now, don’t get us wrong. These tariffs are messy and economically damaging. But they’re not catastrophic.

That is, according to Bloomberg Economics, even with every reciprocal tariff enacted, the average U.S. tariff rate tops out at ~27% (vs. 2.5% last year). Using Fed modeling, that translates to a 3.4% drag on GDP.

That’s certainly meaningful – but not apocalyptic.

By comparison, the 2008 financial crisis knocked U.S. GDP down by more than 8%. The COVID-19 crash did the same.

Even if today’s tariffs stick, we’re talking a fraction of those drops. And we don’t think they’ll be around for long.