Overnight, U.S. stocks experienced a &#34;Black Friday,&#34; with all three major indices declining, led by a 2.7% drop in the Nasdaq, while the utilities sector was the only sector to close higher.
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The &#34;culprit&#34; behind the sharp decline in U.S. stocks is the University of Michigan.
Due to the impact of tariff threats, U.S. short-term inflation expectations from the University of Michigan surged to 4.9% in March, and long-term inflation expectations also reached their highest level since 1993, while consumer confidence hit a new low in over two years.
Since Trump's election, &#34;hard data&#34;—that is, actual economic figures—has remained stable. However, over the past three months, U.S. inflation &#34;soft data&#34; (indicators of inflation expectations based on surveys and markets) has deteriorated sharply, with the University of Michigan's consumer sentiment survey being one of the main drivers of this soft data plunge.
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It is worth mentioning that this is not the first time; since Trump's election as president, there have been six instances when the University of Michigan survey results were released, and the market reacted similarly, resulting in six sell-offs in U.S. stocks.
Recent University of Michigan consumer surveys indicate that U.S. inflation expectations have broken through the range fluctuations seen in recent years. For a considerable time, the University of Michigan's 5-year inflation expectations fluctuated within a narrow range of 2.9%-3.1%. In June 2022, when U.S. inflation was at its peak in this cycle, the initial value of this inflation expectation reached 3.3%, the highest since 2008, while the latest long-term inflation expectations are significantly above the post-pandemic peak levels.
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Regarding the surge in long-term inflation expectations from the University of Michigan, Federal Reserve Chairman Powell previously stated that this inflation expectation data is an outlier.
However, this week several voting members expressed contrary views, believing that survey-based inflation expectation data should be closely monitored. A dovish voting member, the President of the Chicago Fed, stated that if market inflation expectations also rise, it would be a &#34;major danger signal.&#34;
Goldman Sachs bluntly pointed out that investors can ignore the University of Michigan's inflation expectation data. Compared to other surveys, the University of Michigan's survey has many design limitations. The three main issues with this survey are:
<blockquote>
<ul>
<li>Inflation expectations are highly partisan: The inflation expectations in the survey have become extremely partisan</li>
<li>The proportion of Democrats is too high: Among the respondents participating in the University of Michigan survey, the proportion of Democrats has consistently been higher than that of Republicans.</li>
<li>Change in survey method: The shift from telephone surveys to online surveys has led to more extreme responses regarding inflation expectations.</li>
</ul>
</blockquote>
Goldman Sachs believes that these factors collectively pushed the University of Michigan's short-term inflation expectations up by about 1.3 percentage points and long-term inflation expectations up by about 0.5 percentage points. In particular, changes in party composition and intensified partisan positions led to a significant increase of 1 percentage point in one-year inflation expectations in February.
Looking ahead, investors need to closely monitor the University of Michigan survey data to be released on April 11 and 25, as this may trigger a new round of market volatility.
With the tariff deadline on April 2 approaching, will this time be different? Will the market rebound? According to CCTV News, U.S. President Trump previously reiterated during a joint session of Congress that he would begin imposing reciprocal tariffs on April 2. Currently, Europe has proposed concessions and plans to formulate a &#34;concession list,&#34; while India and the UK have also sent signals of goodwill, and Canada has not yet issued any related signals

Since Donald Trump was elected president, the market has reacted the same way during the release of the last 6 University of Michigan inflation expectation survey results, with U.S. stocks experiencing 6 declines

- U.S. stock markets experienced a significant decline, with the Nasdaq dropping 2.7%, while utilities were the only sector to gain.  
- The downturn was largely attributed to rising inflation expectations from the University of Michigan, which reported a short-term inflation expectation of 4.9%, the highest since 1993, alongside a drop in consumer confidence.  
- Analysts, including those from Goldman Sachs, have raised concerns about the partisan nature of the survey and its impact on inflation expectations, urging investors to monitor upcoming survey results for potential market volatility.

The largest short interest in the US stock market: University of Michigan