A variety of negative factors gathered together at the worst moments, investors' complacency has disappeared, and they are finally beginning to take Trump's tariff threat seriously.

Buffett recently called tariffs a "act of war" that could further aggravate inflation. After digesting a lot of information in recent weeks, the U.S. stock market seemed to agree with this statement, and stocks fell again on Monday (March 3). After the U.S. presidential election, experts have put forward many reasons why there is no need to worry about what Trump says. On the contrary, they believe that economic stimulus measures such as relaxing regulation will become the most prominent symbol of this term, rather than a trade war, etc. Now it seems that Trump is serious about key parts of his agenda—such as tariffs—and the stock market is back to its level in early November, erasing gains after the election.

Trump said on Monday that the 25% tariff on Mexican and Canadian goods would take effect on March 4, and stocks fell. The Dow fell 1.5% on Monday, the S&P 500 fell 1.8% and the Nasdaq Composite plummeted 2.6%. "I think Trump and the stock market's honeymoon period has ended," said Dave Rosenberg, founder of Rosenberg Research. He pointed out that only 8% of the S&P 500 stocks were at a 52-week high, far lower than the peak of 25% in early November last year. Rosenberg said: "The stock performance after this election is far from that of Trump's 1.0 in the same period... The U.S. economy has not accelerated its growth, but is slowing down."

For some people with good memory, this may not be surprising. Looking back in 2018, the uncertainty of tariffs was the main reason for the decline of the S&P 500 during Trump's first term. Barron's warned in December that stocks could fall after the presidential inauguration day. The stock market seems to have begun to take the issue seriously after the S&P 500’s painful February.

TS Lombard analyst Jon Harrison said: "The start of Trump's 2.0 tariff diplomacy is obviously step-by-step, including easy wins, delaying taxation and increasing tariffs.High, these have created a sense of complacency among investors, who believe Trump will negotiate a deal without threatening to impose a large-scale taxation as he did during the campaign. Now that complacency is gone. ”

The White House's decision to impose an additional 10% tariff and advance a 25% tariff on Mexico and Canada has completely shattered investors' hopes that trade flows will not be too disturbed, while allowing the stock market to take Trump's other tariffs step by step, such as threatening to impose a 25% tariff on the EU.

When Trump also asked the U.S. Foreign Investment Commission to review investment in certain areas, it would not seem easy to make concessions with each other. Harrison wrote in his research report, "Other announced measures may once again raise concerns about previously resolved issues, including compliance with accounting standards and strengthening the implementation of regulations on corporate listing in the United States." It has been stated that these measures and tariffs will be countered. ”

So, for the foreseeable future, stock markets will continue to be constrained by the tug-of-war of trade negotiations, while other data have begun to shake investors' confidence in the U.S. economy.

Evercore ISI analyst Julian Emanuel said: "In addition to the negatives caused by the uncertainty of the trade war 2.0 to the S&P 500, inflation and massive layoffs are making the 'soft data points' such as consumer confidence turn yellow, which in turn threatens economic growth. "Emanuel also pointed out that the increase in unemployment claims last week was the first crack in the "hard data" about economic health. In short, various negative factors gathered together at the worst moments. 22V Research analyst Dennis DeBusschere wrote in the research report, "With the slowdown in the U.S. economic growth has slowed down, trade has brought shocks to consumer demand - assuming the tariff threat is implemented - increasing the probability of a negative feedback loop in the U.S. economy. ”

However, investors do not have to give up U.S. stocks altogether. If tariff uncertainty is slow, high volatility will continue to be the theme of the stock market. However, although the S&P 500 may fall further in the coming months, Evercore ISI's Emmanuel believes that the index may still close up and reach 6,800 points this year.Lun Weekly also believes that this year's S&P 500 will eventually rise cumulatively throughout the year.

DataTrek analyst Nicholas Colas believes that even if there are more volatility in the future, investors should look at the long term. He wrote in his research report, "It is important not to forget that in terms of stock price performance, the 'American Exceptionism' is a relatively/long-term concept and does not guarantee that the S&P 500 will outperform all competitors in any quarter. Considering the excessive expectations and multi-faceted uncertainty, U.S. stocks are doing well at present."

This may be true, but to borrow Buffett's metaphor, this does not mean that U.S. stocks will not be hit before the recovery, after all, war will not benefit anyone.