Investors are looking for stock market crash protection if the recession fears

In view of the lows in the past few days, investors long for protection by working on a large decline in the S&P 500, so Marketwatch.

What did investors get so concerned? Several forces drive their concerns: uncertainty about geopolitics and prices, increasingly exhausting consumers, since the tariffs increase the costs for US companies, which increases prices for maintaining profit margins, and an increasing risk of recession if consumers spend less.

The Federal Reserve clearly has to do with considerable uncertainty: should it increase the interest rates for the Crimea inflation caused by tariffs or lowers interest rates to suffocate a recession in the bud?

What should investors do about it? The answer depends on how much you need cash and your view of the long -term future.

Investors who are looking for crash protection

Investors offer protection against a stock market crash. In the last week of February, options bought options, the value of which is increased when the value of the S&P 500 index drops. Marketwatch reported.

In particular, since the dealers have recently bought the worst two -week decline from dealers since the worst two -week decline in the S&P 500 and the Nasdaq. This is the right, but not the obligation to buy a security at a higher price in a future month, and it is bound to Wall Street’s fear meters: the CBOE volatility index, also known as VIX.

Such call options become valuable when the VIX increases, and this happens when investors expect the S&P 500 to continue to drop. The VIX has increased by 50% – from around 15 since February 19, when the demand for these options is increasing – to almost 24 on March 5, so loud Google Finance.

However, the options are only value if the VIX is more than doubled until 50. This indicates that dealers are afraid of going forward much worse – a scary event in the order of global pandemic.

How come? The volume of this crash protection betting 260,000 contracts for strike calls from 55 a.m. to 75 a.m. Marketwatch. The VIX has not acted more than 50 since the beginning of Covid 19 pandemic in the United States in March 2020. Fact set Data.

Customs cause high economic and consumer uncertainty

• What can investors be afraid of? Three options are uncertainty among managing directors and consumers, rising business costs due to tariffs, and the high probability that the managing directors increase companies increase prices to limit the damage to their margins.

Uncertainty among managing directors

Since President Donald Trump took office, the trust of consumers and the business has decreased. The preliminary index of the consumer mood of the University of Michigan, based on the surveys carried out since Trump’s inauguration, decreased in February. After Visage Worldwide, an increase in the trust of the small company in February was reversed in February. And January 2025 was “the calmest January in a decade for mergers and acquisitions,” remarked the Wall Street magazine.

Economic uncertainty paralyzes the managing directors. “There is so much turbulence,” said Ethan Karp, CEO of Cleveland Magnet, compared to the magazine. “People don’t know what will end up. Although the tariffs have a potential long -term benefit in relation to new supply, the immediate things that happen are only turbulence. “

Blu Monaco, an office accessories by Warminster, Pennsylvania and a stationary retailer, do not know how to react. Blu Monaco asked his Chinese manufacturer by a 10%discount to compensate for the costs for higher tariffs. magazine.

A Chinese manufacturer said that he would grant Blu Monaco a discount if the company increased its order quantity. Chong does not want to buy the cash flow risk more than it needs. She also considered a partnership with a Vietnamese manufacturer, but is waiting because she fears that Trump can impose Vietnam tariffs that magazine noted.

Wyoming Machine, a 45-member Minnesota sheet metal manufacturer who imports aluminum from Canada, fights with the company. “There is a lot of uncertainty in the business, no matter what we do,” said co-president Traci Tapani magazine. “The president, who goes back and forth every few days, is not helpful.”

New tariffs in Canada, Mexico and China could increase consumer prices

The tariffs, which came into force from Canada, Mexico and China on March 4, could lead to higher prices for Americans, noted New York Times.

After the United States had raised goods from these countries, Canada, Mexico and China received tariffs for US exports to their markets. The tariffs for products from China to the USA are now 10% of a tax of 20%. All of them from Mexico and most of Canada – with the exception of energy products that are exposed to a tariff of 10% – were subject to a tax of 25% Just wrote.

China countered the tariffs of the United States by lending a tax of 15% on the country’s US imports from chicken, wheat, corn and cotton and a 10% tariff for other agricultural products. Canada imposed a tariff from 25% to 30 billion US dollars worth not specified US goods, found that the US goods are worth a price worth 30 billion US Just.

US consumers could soon pay more for food and other products. Like that Just According to reports, higher prices could be made for the following American wallets:

• Mexican avocados, tomatoes and strawberries;
• Mexican beer and tequila;
• Canadian meat, grain and maple syrup;
• Automobile – As a car manufacturer, send what the Just “Tens of billions of dollars’ value” of finished vehicles, engines and transmissions in the USA with Canada and Mexico are known to be known to the USA.
• petrol – Especially in the middle west, since 60% of oil imports come from Canada in US aggregates;
• Chinese consumer electronics – like mobile phones, computers and video games; And
• Canadian softwood and plaster – which is used for drywall construction – could already increase high property prices.

Managers will pass on higher costs to consumers

US companies pay the tariffs and most managers do not accept lower edges. Instead, they will pass on their higher costs to consumers by increasing prices, according to an EY-Partenon economist of prices presented CNBC.

An EY survey of 4,000 managers showed that half would charge consumers two thirds of the additional costs from tariffs. “Today they do not care whether the tariffs come tomorrow or in a week. CNBC.

A typical example is the Best Buy, which imports considerable amounts of consumer electronics from China and Mexico. “We assume that magazine.

Increasing risk of recession

If this indicator takes about two thirds of US economic growth into account in consumer expenses, this indicator could be a gross domestic product. The higher prices could make consumers to only output for what they need the most and discretionary articles. In addition, the possibility of a large number of state jobs can contribute to the growth problem.

Economic and market data also support the higher risk of recession. On March 3, “the GdPnow estimated the Federal Reserve Bank of Atlanta a precisely observed model of the gross domestic product, estimated a significant decline of 2.8% in annualized growth for this quarter. This is a sharp contrast compared to an increase of 2.3% last week ” Forbes.

In the meantime, the short-term interest rates rose over long-term last month and created a reverse return-curve “” Federal Reserve Favorite Recession Indicator ” CNBC.

The return curve was reversed in February when the 10-year financial return went under the 3-month note. This step could predict a recession because it indicates that “the Fed will reduce short -term interest rates as a response to an economic withdrawal in the future” CNBC.

The bond market smells of “recession in the air,” said FWDBonds chef economist Chris Rupkey CNBC. The yield curve in version “is a pure piece in the economy that is not as strong as people thought it would be at the beginning of the Trump government,” he added. “I don’t know whether we predict a full -grown recession or not. You need job losses for a recession, so we miss an important point in the data. “

What investors should do

The answer depends on how long you have to wait for the current turbulence. If you believe that you will have to convert your investments into cash in the next five years, it can be worth considering the sale of shares or taking out portfolio insurance.

Otherwise, it can be a good approach to continue to buy if the stock prices drop.