In a chorus of bearish views, the US stock market finally couldn't hold on any longer.

After experiencing two months of "immunity" to threats of tariffs and Federal Reserve tightening policies, strong economic data in the United States has been a reassuring factor for investors to continue entering the market. However, after the latest weak economic data was released, it seems that the US stock market couldn't hold up anymore. On the 21st, consumer confidence, real estate, and service industry data released in the United States all performed poorly, causing investors to feel anxious about the future of the US economy and inflation stickiness. The S&P 500 index saw its largest single-day drop of the year, falling by 1.7%. At the same time, safe-haven assets were being favored, with the 10-year US Treasury bond yield falling nearly 8 basis points to 4.43%. Hedge funds like Point72, Morgan Stanley, and Goldman Sachs have issued warnings recently: the US stock market may experience a correction. Goldman Sachs believes that the US stock market is becoming increasingly crowded, and the buying motivation on dips is weakening. Chief market strategist at JonesTrading, Michael O'Rourke, stated: "Previously, bulls in the market were fueled by speculation and hope that Trump's policies would promote deflationary growth. But the data we're seeing now does not support this argument." Economic data is no longer the reassurance Continued economic data has always been one of the pillars supporting the "America First" investment logic, but it may also sow the seeds for a rapid correction. For bullish investors, the strong economic data previously released has been their reason for speculation. However, reports released on Friday showed that, according to final data from the University of Michigan for February, consumers expect prices to rise at a rate of 3.5% per year in the next five to ten years, the highest level since 1995. At the same time, consumer confidence is low. In addition, in terms of inflation expectations that the market has been paying attention to, the final value for the 1-year inflation expectation in February was 4.3%, reaching a new high since November 2023. The final value for the 5-year inflation expectation in February was 3.5%, also reaching a new high since April 1995 and the largest month-on-month increase since May 2021, with the expectation at 3.3%. The preliminary value for the US services PMI in February unexpectedly fell into contraction, reaching a new low since January 2023; while the previously soft manufacturing sector continued to improve and expand, and was better than expected; dragged down by the service industry, the preliminary value for the Markit composite PMI in February reached the lowest level since September 2023. After the data was released, expectations for rate cuts increased, with the US rate futures market currently expecting a rate cut of 44 basis points this year, higher than the 38 basis points on the previous day. It is widely believed that the Federal Reserve may restart the rate-cutting process at the policy meeting in September or October. Marija Veitmane, Senior Multi-Asset Strategist at State Street Global Markets, pointed out: "Institutional investors took a very risk-prone position at the beginning of this year. As long as the US economy continues to move forward, bullish investment strategies can continue." These data have led to a sharp shift in market sentiment. The VIX fear index rose to one of the highest levels this year, although still below 20. The bond market also showed a safe-haven sentiment, rising for the third consecutive day. Capital flows: concerns after record inflows Low volatility in data and asset classes has been a factor driving investors to continue investing in the market this year. Data shows that US cross-asset exchange-traded funds (ETFs) have attracted $155 billion in funds so far this year, setting a new record for the same period in history. According to data cited by Bank of America from EPFR Global, as of last Wednesday, the weekly inflow into junk bonds reached the highest level in three months. EPFR data shows that the flow of funds into the US stock market in January set a new high since the beginning of the year. In the current market environment, investors need to reassess their strategies. Ayako Yoshioka, a senior investment portfolio manager at Wealth Enhancement Group, believes that it is not wise to abandon risky assets as long as the job market remains relatively healthy. She advises investors to maintain a diversified investment portfolio and continue investing in various risky assets to withstand market volatility. However, Bruno Braizinha, interest rate strategist at Bank of America, warned: "We are entering a slightly complacent area, so it makes sense to hedge against some tail risks. Given the high degree of uncertainty in economic policy and trade, you should hedge against these risks." This article is translated from "Wall Street News" by Zhang Yaqi, edited by Li Cheng.