Market "dullness" shows up! Trump's tariff threat is losing its magic, and the US stock market is moving away from panic mode.

After experiencing drastic fluctuations in stock prices in April due to the ups and downs of tariff negotiations, the market now appears fatigued in response to new developments in the trade war. For example, when President Trump mentioned last Friday that they didn't have time to negotiate with all countries and would soon impose tariffs on many countries, the stock market remained almost unaffected. Similarly, news of the European Union submitting a revised trade proposal this week also failed to create much excitement, as the proposal includes plans to gradually eliminate tariffs on multiple products. Market observers pointed out that this indifferent attitude stems from investors' general belief that the situation in April, where stocks, bonds, and currencies were all hit hard, taught Trump a lesson the widespread market crisis at the time forced him to suspend most of the tariff plans. Therefore, the market expects that the final tariff measures will be less severe than the initial threats, which is not a cause for concern. It is precisely this optimistic sentiment that has pushed US stocks to steadily rise over the past six weeks. Marshall Front, Chief Investment Officer at Front Barnett Associates LLC, stated: "The market has realized Trump's style of making much noise but taking little action. Investors believe that the actual tariff measures will be much lower than originally anticipated, and this judgment is accurate." Dennis DeBusschere of 22V Research stated that the sensitivity of the S&P 500 Index to tariff-related news has significantly decreased since April. The company uses principal component analysis to measure market volatility, a statistical method that identifies key influencing factors by analyzing a large amount of index performance data. The data shows that currently only about a third of the daily volatility in the S&P 500 index is related to tariff news, a substantial decrease from the peak of 80% in early April. Front stated: "Multiple pressures are forcing Trump to adopt a more moderate tariff policy. The main pressures come from the financial markets widening spreads in high-yield bonds, volatile stock market movements signals he cannot ignore." After experiencing storms in April, the market in May is gradually becoming calmer. The daily volatility of the S&P 500 index in early April reached extreme levels not seen since the 2008 financial crisis, but has now returned to normal levels. The trade truce between China and the US, while temporary, has also eased market tension. Progress is being made in the agreement between the US and UK, although progress may be slow. After soaring in April, a trade policy uncertainty index has now fallen to levels before Trump's tariff plan was announced, closely mirroring the trend of the S&P 500 Index. Front stated: "The fear of tariffs has greatly diminished, but policies remain unpredictable." Macro impacts However, other risk factors are emerging. Moody's downgrade of the US AAA rating, cold demand in US bond auctions, and concerns about demand have caused setbacks in both the stock and bond markets. 22V research shows that any event could become a key variable affecting the market for example, the COVID-19 pandemic in 2020 contributed to 70% of the volatility in the S&P 500 index. Kevin Brocks of 22V stated: "The stock market is still vulnerable to macroeconomic shocks, but unless a shock occurs, fundamentals will regain pricing power." Despite soft business outlooks, first-quarter financial reports have overall exceeded expectations, and multiple economic data indicate that previous pessimistic expectations from sentiment surveys may have been exaggerated. Therefore, the synchronized trend seen in the market during periods of major macro impacts has also weakened. Michael Kantrowitz, Chief Investment Strategist at Piper Sandler, stated: "We are entering a new phase of divergence between data and opinions. This will maintain lower market correlation, with individual stock performance more dependent on microeconomic fundamentals rather than being swayed by macro news as in the beginning of the year."