The euphoric postelection trade that swept across financial markets has turned into an uncertainty trade. What looked like a robust Trump trade in several asset classes may have fizzled until there is more clarity on policy and the economy.

The dollar, crypto, and bond yields are all off their highs after rallying into the beginning of the year on the promise of better growth. The S&P 500 +0.47% fell 4.6% from Feb. 19 through Thursday’s close. Small-caps are lagging, momentum names are sliding, tech is in decline, and defensive stocks like consumer staples and healthcare have been the best performers.

President Donald Trump said Thursday he planned to go ahead—again—with tariffs on China, Canada, and Mexico. Stocks sold off and the 10-year Treasury yield +0.32% traded just below 4.3%. Trump said tariffs of 25% would go into effect March 4 for Mexico and Canada and China would face additional tariffs of 10%.

“I think it’s a risk-off mood, which is what you would expect when there’s a growth scare,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “At first blush, people thought the tariffs were going to be inflationary, but now as they drag on, and people have more time to think about it, they’re more concerned about the slowing-down impact.”

The 10-year yield peaked at 4.8% Jan. 13 as investors worried that some Trump administration policies that would be positive for the economy would also saddle the country with more debt. The DXY dollar index DXY +0.07% hit a 52-week high on Jan. 10 and has since fallen 2%.

Optimism isn’t dead. But now markets reflect a wait-and-see posture by investors. Many are waiting to see how tariffs could impact corporate profits.

Rick Rieder, BlackRock’s global chief investment officer of fixed income, said he believes the stock market could finish the year up more than 10%. “I still think the economy is in good shape,” he said. “But I think scaling back a little of what looked like ‘off-to-the-races’ growth I think makes sense,” he said.

The trajectory of stock, bond, and currency markets are linked. The 10-year yield, before it turned lower, had neared the 5% level where stock market analysts worried it would slow stock market gains. The dollar, when on a rising trajectory, threatened to dampen corporate profits.

Treasury Secretary Scott Bessent said on Feb. 6 he is focused on keeping the 10-year yield low. That was an important signal to global investors, who keep a close eye on the 10-year Treasury yield. It affects home mortgages and many other loans.

The 10-year yield’s rise earlier in the year in part reflected the expectations that Trump’s tariff policy could be inflationary, said Ian Lyngen, BMO Capital Markets head of U.S. rate strategy. Trump campaigned on maximalist tariffs. Since taking office, he has shown a willingness to negotiate some tariffs, while others have yet to materialize. That lower yields. Yields move opposite bond prices.

But investors are still looking for clarity.

“I think the market is responding to the increase in uncertainty, and the fact of the matter is we don’t have enough information because the decisions are being made and then unmade,” said Lyngen.

Softness in other economic data has helped push yields lower.

“There are growing concerns about the direction of the employment market and therefore the broader real economy,” said Lyngen. One worrisome data point was the seven-point decline in February consumer confidence, the index’s biggest monthly decline since August 2021.

Walmart raised questions about the strength of the consumer last week when it disclosed 2026 fiscal year revenue and profit targets that were lower than Wall Street expectations.

BlackRock’s Rieder said he believes the consumer is still in good shape, and the economy is being driven by the higher end consumer.

Stocks should go higher because companies have strong balance sheets, Rieder said. “You’ve got more than a third of the market that throws off an average [return on equity] of more than 33% and buys back a huge amount of their stock,” he said.

He also said the 10-year yield could challenge 5% again, depending on the course of inflation but that it should mostly stay in a range below that level and not get much above it, but it should stay in a range.

U.S. government debt is near 100% of gross domestic product. That outsize balance is Rieder’s biggest concern, but he is encouraged by the Trump administration’s focus on the issue. Bessent recently said he would not immediately extend the term of government debt, as some of his past statements suggested he might. Rieder took that as a positive.

“The sensitivity to it [debt duration] is a big deal. Quite frankly I think the pragmatic nature is we don’t have to extend the term of the debt today until we bring inflation down and people are comfortable spending is coming down. That makes a lot of sense,” Rieder said.

“I also think the ability to create some deregulation of the financial industry to create places to hold more of the debt is a big deal. I think [Bessent’s] focus there is important,” he said.

The efforts by Elon Musk and his Department of Government Efficiency has sent a strong signal that the Trump administration is trying to curb spending by reducing head count and costs. But its aggressive strategy has drawn lawsuits and political opposition. How those public-sector cuts will affect the private employment market is also unclear.

Even with uncertainty, many strategists are betting the animal spirits from Trump’s policies will keep stocks rising this year. But to do so, the administration will need to balance its actions against the real impact they could have on inflation, confidence, and employment.

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