In the past week, the market was filled with mixed signals, yet U.S. stocks still approached historical highs.
On one hand, Trump's tariff policy continued to attract attention, and concerns about trade friction have not completely dissipated; the &#34;DOGE&#34; plan led by Musk proposed significant cuts to federal wages, raising speculation about the economic outlook; additionally, the rebound in CPI data brought uncertainty to the Fed's interest rate cut prospects.
On the other hand, there has been a turning point in the Russia-Ukraine conflict, and the performance of components in the PPI, particularly the PCE price index favored by the Fed, has been weak, alleviating market concerns about runaway inflation.
Throughout the week, the S&amp;P 500 index rose 1.47%, nearing historical highs, while the Dow Jones, closely related to the economic cycle, increased by 0.55%, and the tech-heavy Nasdaq rose 2.58%.
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Analysis indicates that the market's reaction to tariffs has shifted from initial panic to rational analysis. Investors have realized that tariff policies are more of a bargaining chip for the Trump administration in international trade negotiations rather than purely economic destruction tools. This shift in perception has reduced the market's sensitivity to tariffs, thereby diminishing their negative impact on the stock market.
Moreover, during this week's market fluctuations, FOMO (fear of missing out) sentiment played an important role again, driving the continuous rise of the market.
<h2>Investors Reinterpret Tariffs</h2>
Andrea Cicione, an analyst at TS Lombard, pointed out in a recent report titled &#34;How I Learned to Stop Worrying and Love Tariffs&#34; that the market seems to have &#34;learned to stop worrying.&#34; This change in attitude reflects a new understanding among investors regarding the Trump administration's tariff strategy.
According to media analysis, Trump's tariff policy is currently mainly used to achieve geopolitical goals rather than directly hitting consumers. For example, some exemptions in the tariff proposal against Canada apply to the energy sector, and steel and aluminum tariffs will not immediately affect end consumers.
Last week, the possible announcement of reciprocal tariffs also received a positive response from the debt and stock markets, which is contrary to intuition. Capital Economics analyst Hubert de Barochez believes that the market's positive reaction may stem from the following points:
<blockquote>
<ul>
<li>Tariffs are seen as a negotiation strategy rather than an end goal</li>
<li>There is a 6-week buffer period for policy implementation, and Trump may change his mind</li>
<li>The harm of reciprocal tariffs is less than that of general tariffs</li>
</ul>
</blockquote>
However, Barochez still expects Trump to ultimately raise tariffs significantly, which will put pressure on the stock and bond markets.
The market also seems unfazed by DOGE's scythe-wielding cuts to federal wages.
According to a report by Veneta Dimitrova and London Stockton from Ned Davis Research, about 75,000 workers accepted buyouts, accounting for approximately 2.5% of the federal workforce, which will save about $15 billion, while the total federal employee compensation is $650 billion
Among the $7 trillion in federal spending, the expected savings amount is just a drop in the bucket.
FOMO sentiment is also playing a role again. Investors refuse to repeat past mistakes, avoiding losses due to panic. This sentiment has appeared multiple times during the last two presidential terms, and Trump's trade threats failed to deter Wall Street's risk appetite.
<h2>Goldman Sachs Warns of Downside Risks</h2>
Despite the strong performance of U.S. stocks, Scott Rubner, Managing Director of Global Markets at Goldman Sachs Group, recently issued a warning that U.S. stocks are about to face downward pressure.
In his latest report, Rubner pointed out that the U.S. stock market is becoming increasingly crowded, and the momentum for buying on dips is weakening. He emphasized, &#34;Market participants are everywhere, including retail traders, 401k fund inflows, year-to-date allocation funds, and corporations. The dynamics of capital flow demand are changing rapidly, and we are approaching negative seasonal factors.&#34;
Although the stock market was able to quickly rebound from intraday lows after the release of better-than-expected U.S. inflation data on Wednesday, demonstrating remarkable resilience, Rubner believes this situation is difficult to sustain, as concerns triggered by DeepSeek and Trump's tariff policies have not led to widespread adjustments.
From the perspective of changes in capital flow, Rubner listed several key factors indicating an increase in market downside risks:
<blockquote>
<ul>
<li>CTA trend traders are leaning towards shorting: They are expected to sell about $61 billion in U.S. stocks over the next month.</li>
<li>The corporate buyback window is about to close: This important support factor will disappear after March 16.</li>
<li>Hedge fund risk exposure is increasing: Last week, net buying in global stock markets reached a two-month high.</li>
<li>The retail trading frenzy may fade: The strong buying at the beginning of the year may gradually weaken in March</li>
</ul>
</blockquote>

Analysis indicates that the market's reaction to tariffs has shifted from initial panic to rational analysis. Investors have realized that tariff policies are more of a bargaining chip for the Trump administration in international trade negotiations, rather than purely economic destructive tools. This change in perception has reduced the market's sensitivity to tariffs, thereby diminishing the negative impact of tariffs on the stock market

- The U.S. stock market approaches historical highs despite mixed signals, with the S&P 500 rising 1.47% last week.  
- Market reactions to Trump's tariff policies have shifted from panic to rational analysis, viewing tariffs as negotiation tools rather than economic threats.  
- However, Goldman Sachs warns of potential downward pressure on the market due to increasing crowding and changing fund flow dynamics.

After a week filled with "tariffs, DOGE, and rising inflation," U.S. stocks are approaching historical highs again