Investors are good at finding ways to almost any government policy, for better or worse. Once set, tariffs can be modeled to see how companies can affect profits, prices, and the broader economy. Large-scale shooting of federal workers can be analyzed to see how unemployment rates can be increased.
What investors really strive to pay is uncertainty. At present, there is a deep sense of uncertainty in the stock market.
The Trump administration’s whipping policy and statement have already made this point. To name only three: during the period, inappropriate tariff threats; President Trump refuses to rule out the possibility of a recession and then guarantees that it is unlikely to decline; chaotic cuts cut to the federal government.
For many of Mr. Trump’s supporters in Washington and across the United States, the president is following what he should do: keep room for trading partners, such as China and Mexico, in order to achieve a huge balance.
But for investors, this dazzling shift has led to the Trump administration’s “untradable” early stock markets. Perhaps the government will raise tariffs further and stocks will fall again. Perhaps the government will give up tariffs altogether, which may soothe the market.
“The fluctuation is not easy,” Mr. Goncavis said. “Having any belief to hold a point of view is a challenging environment.”
Since peaking last month, the S&P 500 has fallen about 9%, usually volatile over the course of a day. The index is close to the psychological threshold of correction, which is defined as 10% or higher away from its high. Other indices that are more closely related to economic flows and flows have fallen further. Investors have poured into the options market in an attempt to hedge further large stocks.
Uncertainty is difficult to price. As time goes by, it still has costs.
As investors are retreating from the market and positioning themselves defensively in anticipation of the storm, consumers and business leaders are becoming increasingly cautious, according to a recent survey. When uncertainty ruled, consumers and businesses tended to create large spending plans, while businesses reduced hiring.
“If you are waiting and seeing, you won’t buy a new car or take a leave, and if you are a company, you won’t hire or spend money,” said Torsten Slok, chief economist at Apollo Global Management.
This is the cost of uncertainty.
As investors, businesses and consumers freeze, the economy cools down. This has not been shown consistently in official data, which lag behind events affecting the current economy. Airlines have warned of lower travel bookings, retailers have warned of poor financial situation for consumers, Food producers warn that tariffs could lead to new prices rising.
The latest monthly survey of small businesses by the National Federation of Independent Businesses shows that uncertainty is close to the highest level of long-term survey records.
“The uncertainty is high and rising on the streets,” Bill Dunkelberg, the group’s chief economist, said in a statement.
In a different survey of large U.S. companies by the Business Roundtable, the CEO said they reduced hiring and capital expenditure plans and lowered sales expectations, partly because of “the atmosphere of uncertainty in Washington.”
As businesses control hiring programs, job losses may be resolved. If there are few people working, consumer spending may drop. If consumer spending drops, businesses will make less profits. As company earnings expectations fall, the stock market will also fall.
That’s not what most investors expect to target this year.
After turmoil in 2024, the stock market initially welcomed the new government and hoped that the long-term rally in the previous two years would continue. Earlier, Mr. Trump’s difficult speech on tariffs was seen more as a negotiating position than a policy position he would make. And in a sense, his reputation as a barometer of his success would make anything sold out.
Some investors still hope so, and Mr. Trump will eventually back down on tariffs.
Others are not sure. In the options market, investors are conducting large trades to protect them from large volatility, which usually happens if the stock drops sharply.
Investors are also investing in betting, and investors can only get a return if the S&P 500 drops sharply in the coming months. These trades may be attempts to prevent this decline or profit from it. Either way, they show that investors can help the rough market in the future.
“This uncertainty will linger,” Mr. Goncavis said. “The question is: What should I do if I go too far?”
