Market sentiment has suddenly changed! Optimism is fading and uncertainty is rising.

Recently, the investment atmosphere on Wall Street is changing. The optimism that once drove the market after Trump's election victory has significantly diminished, replaced by concerns about the uncertainty of the US economic outlook. Since the beginning of 2025, signs of a shift in market sentiment have gradually emerged, with investors witnessing the most obvious signal on Tuesday. The S&P 500 index fell for the fourth consecutive trading day, marking the longest losing streak since January 2. Data from FactSet shows that some popular tech stocks, such as Palantir Technologies (PLTR.US), saw significant declines, sparking further discussions in the market about whether overvaluation is exacerbating investor unease. Lori Calvasina, head of US equity strategy at RBC Capital Markets, pointed out in a recent report that the market "sentiment" is weakening. Callie Cox, chief market strategist at Ritholtz Wealth Management, said in an interview, "Market sentiment is declining, and there are many valid reasons behind it." The early optimism surrounding tax cuts and deregulation by the Trump administration is being replaced by concerns about the potential economic growth constraints and inflationary pressures of tariff policies and immigration control. Concerns about "stagflation" risks are reemerging. Prominent investors such as Steve Cohen, owner of the New York Mets baseball team and founder of Point72 Asset Management, have issued warnings that the stock market may face a short-term correction. The Conference Board's Consumer Confidence Index, released on Tuesday, fell to an eight-month low, serving as a catalyst for the recent downturn in the stock market. The American Association of Individual Investors (AAII) weekly survey shows that investor sentiment has become noticeably more cautious. Data shows that earlier this month, investors holding pessimistic expectations outnumbered those with optimistic views by nearly 19 percentage points, the largest gap since November 2023. Nonetheless, historical data shows that when sentiment is extremely tilted in one direction, the market may experience a trend reversal. Defensive stocks such as healthcare and consumer staples have been the best-performing sectors in the S&P 500 since 2025. Meanwhile, the Roundhill Magnificent Seven ETF, which tracks the performance of large tech stocks, has entered a correction range. The Cboe Skew Index broke 183 last week, reaching its highest level since 2005. This indicates a surge in demand for S&P 500 put options, reflecting investors' unease about the future of the stock market. The yield on the 10-year US Treasury bond fell to its lowest level since 2025 on Tuesday, reflecting market concerns about the economic outlook rather than confidence in easing inflation. Chris Rupkey, chief economist at FwdBonds, said, "The sharp drop in bond yields suggests the market is smelling the scent of a recession." The US Economic Surprises Index has been negative for four consecutive days, indicating that recent economic data has been below market expectations, especially in the weakness of service sector activities and consumer confidence. Despite soft consumer and service sector data, inflation expectations are rising, casting a shadow of "stagflation" over the market. Although Bitcoin is considered "digital gold", its recent performance has been contrary to expectations. While gold futures prices reached a near-historic high of close to $3,000 per ounce this week, the price of Bitcoin fell below $87,000, its lowest level since November last year. Stifel analyst Barry Bannister pointed out that the trend of Bitcoin is more like a high-risk growth stock rather than a safe haven asset. While market sentiment is becoming more cautious, some indicators remain relatively stable. For example, the CEO Confidence Survey by the Conference Board shows that confidence among US corporate executives has improved compared to the fourth quarter of last year. Additionally, CFTC data shows that net short positions in S&P 500 E-mini futures have recently decreased. However, the Cboe Volatility Index, known as the "fear index" on Wall Street, briefly surpassed 20 points on Tuesday, indicating an increase in market risk aversion. Danny Kirsch, director of options trading at Piper Sandler, said in an interview, "Market participants are increasing protective hedging, which is reasonable."