Overnight, U.S. stocks experienced a &#34;Black Friday,&#34; with all three major indices declining, led by the Nasdaq, which fell 2.7%. 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 tariff threats, the short-term inflation expectations from the University of Michigan surged to 4.9% in March, while long-term inflation expectations also reached the highest level since 1993, and 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, in 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 was elected 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 period, 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 Jerome Powell previously stated that this inflation expectation data is an outlier.
However, this week several voting members &#34;sang a different tune,&#34; arguing that survey-based inflation expectation data should be closely monitored. A dovish voting member, the President of the Chicago Federal Reserve, stated that if market inflation expectations also rise, it would be a &#34;significant 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:
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<ul>
<li>Inflation expectations are highly partisan: The inflation expectations in the survey have become extremely partisan.</li>
<li>Overrepresentation of Democrats: The proportion of Democrats among respondents in the University of Michigan survey 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
Goldman Sachs believes that these factors collectively drive 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.</li>
</ul>
</blockquote>
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 reiterated during a joint session of Congress that equivalent tariffs would begin on April 2. Currently, Europe has proposed concessions and plans to create 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.
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U.S. stocks suffered a heavy blow on "Black Friday," with all three major indices declining, and the Nasdaq falling by 2.7%. The University of Michigan's consumer sentiment survey is considered the main reason for the market drop, with short-term inflation expectations soaring to 4.9% and long-term inflation expectations reaching a new high since 1993. Federal Reserve Chairman Jerome Powell described the data as an outlier, but some voting members believe it should be taken seriously. Goldman Sachs pointed out the limitations of the University of Michigan survey, advising investors to treat its inflation expectation data with caution

- U.S. stock markets faced a significant decline, with the Nasdaq dropping 2.7%, while utilities were the only sector to gain.  
- The downturn was largely attributed to rising short-term inflation expectations from the University of Michigan, which surged to 4.9%, alongside a drop in consumer confidence to a two-year low.  
- Analysts noted that the partisan nature of the survey and changes in methodology may have skewed results, prompting investors to closely monitor upcoming survey data for potential market impacts.

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