It's not just tariffs. 4 other issues are battering stock market sentiment.

• Trump's trade war has rattled markets but it's not the only issue weighing on sentiment.
• The mood in 2025 has also been soured by weak consumer confidence and a tougher job market.
• The high level of uncertainty is stoking fears of a recession in 2025.

Trump's trade war isn't the only thing that's derailed the stock market in 2025.

While anticipated tariffs have exerted the most pressure in recent weeks, the sell-off has been accelerated by a slew of data points that suggest that the economy is on shaky footing.

Here are four factors that are souring the mood among investors as the second quarter kicks off.

1. Confidence is dropping

Consumers are feeling steadily worse about the state of the economy. Consumer confidence dropped for the fourth month in a row in March, hitting its lowest level since 2021, according to the latest Conference Board Survey.

The Expectations Index, a broad measure of how consumers feel about the outlook for income, business activity, and the job market, dropped to 65.1 this month, its lowest level in 12 years. That's below a key level of 80, a threshold that has typically signaled a coming recession.

CEOs aren't feeling very chipper, either. According to a survey conducted by Chief Executive Group, on average, chief executives rated business conditions in March around 20% lower than conditions in January.

Meanwhile, the outlook among CEOs for what business conditions will look like 12 months from now dropped 28% from levels in January, the most pessimistic business leaders have been since 2012, the firm said.

The downbeat mood is palpable, and Wall Street is taking notice.

"In the US, there is a clear crisis of confidence," Manish Kabra, the head of US equity strategy at Societe Generale, wrote in a note on Tuesday. "Events so far this year have led us to highlight our negative views on the Nasdaq-100 and to underline that trade uncertainty is driving our trading call for the S&P 500 to fall to 5555. Most of these events are 'known knowns'.

2. The AI trade is sagging

The high-flying AI stocks that have boosted the market in recent years aren't doing so well in 2025. Even before the stiffest tariff headwinds shook up the stock market, investors were questioning the longevity of the trade.

In January, DeepSeek, an AI tool from China, surprised markets with a more cost-efficient model to rival US peers like ChatGPT. Since then, investors have been left wondering why the AI "hyperscalers" — companies with big AI ambitions like Meta Platforms and Amazon — have been spending so heavily on chips and other tech. More importantly, they're wondering when they might see a return on such massive capex related to AI.

The Roundhill Magnificent Seven ETF, which has near-equal positions in all the Magnificent Seven stocks, is down 15% year-to-date. By the end of last week, ever Magnificent Seven stock was negative for the year, with Meta the last of the cohort to give up its gains.

Doubts have also been swirling for months on whether top AI firms, like Nvidia, will be able to keep up their chip sales in the coming years.

"At the top of our list of concerns is the potential for excess comput as well as harsher than expected tariffs and/or export restrictions. We think the keys to the next major move in artificial intelligence (AI) stocks will depend on clarity from tariffs," Angelo Zino, a senior analyst at CFRA Research, wrote in a note on Monday.

3. Inflation still looks too hot

Inflation remains above the Fed's 2% target, with Personal Consumption Expenditures inflation, the Fed's preferred measure, accelerating 2.8% in February, up from the prior month's 2.5% yearly increase.

Hotter inflation is bad news on two fronts. For one, it could mean the Fed has less room to cut interest rates this year, meaning interest-rate pressure will continue to weigh on stocks.

For another, higher inflation is raising fears of stagflation, a worst-case economic scenario that describes a slowing economy with stubbornly high prices. Such a case is even harder for the Fed to deal with than a typical recession, as central bankers won't be able to cut rates to boost the economy without stoking higher prices.

In a March Bank of America survey, 71% of fund managers said they saw the risk that the global economy would see stagflation within the next 12 months.

The survey also found record stock selling among fund managers, with investors' allocation to the US stock market dropping to their lowest levels in about two years.

"Faced with modest stagflation, we think the Fed will stay on hold," strategists said in a note. "Risks are skewed toward weaker growth and even higher inflation."

4. The job market is showing signs of slowing

Hiring isn't as strong as it's been in recent years. On top of that, DOGE-related cuts as the government pursues vast budget reduction plans is drumming up uncertainty about future jobs data.

The unemployment rate remained at a historically low 4.1% in February, but continued jobless claims have climbed steadily over the past year, according to data from the US Employment and Training Administration.

Layoffs also appear to be accelerating. US employers announced 172,017 job cuts in February, a 245% increase from job cuts announced the prior month, and a 103% increase from cuts announced in February of last year, according to data from Challenger, Gray, & Christmas.

A weaker job market is stoking fears of a potential recession in 2025, which more forecasters on Wall Street have voiced in recent weeks.

In a recent note, strategists from Goldman Sachs lowered their forecast for GDP growth while raising their forecast for unemployment and the probability of a recession this year.

"We raised our 12-month recession probability from 20% to 35%, reflecting our lower growth forecast, falling confidence, and statements from White House officials indicating willingness to tolerate economic pain," the bank wrote in a note.