Investing.com - Fears that uncertainty around President Donald Trump’s tariff policies could lead to a series of negative consequences for the broader economy are worth considering but not a "foregone conclusion," according to analysts at Sevens Report.

Despite notching a gain on Friday, the benchmark S&P 500 slumped to its worst week in half a year, while the tech-heavy Nasdaq Composite has slid down by more than 10% since touching a record high in December -- putting it squarely in correction territory.

Late last week, Trump unveiled a temporary delay on 25% levies on most goods incoming from traditional U.S. trading partners Canada and Mexico until April 2. The postponement covers products that were included in a prior trade deal signed during Trump’s first term in office.

Although markets breathed some sigh of relief at the decision, investors have still flagged major worries over the confusion swirling around Trump’s near-constant stream of threats, announcements and reversals. The tariffs are also clouding the outlook for inflation and growth, raising fresh fears over a potential slowdown in the U.S. economy.

In an interview with Fox News over the weekend, Trump declined to rule out the possibility of a U.S. economic recession, while warning that the economy was in a transitory period as he embarked on his agenda. But the U.S. President kept up his threats of more tariffs.

"The reason stocks are dropping is the spike in uncertainty and fear that uncertainty will lead to a whole
host of negatives," the Sevens Report analysts wrote in a note to clients on Monday.

The near-constant stream of "scary" trade-related headlines has also fueled "louder and more frequent" predictions for "continued declines in stocks," the analysts added.

Along with the rapid-fire tariff developments, the outlook remains murky around a measure in Congress to avert a federal government as well as separate extensions to the U.S. debt ceiling and tax cuts.

Concerns remain that these intertwining narratives may persuade households and business to "hole up" and wait for more clarity, the analysts said, arguing that such restraint in spending and investment could cause a wider economic slowdown and a drop in corporate earnings.

However, "it’s fear driving this market," not actual bad economic data or dire company results, they said.

"[I]t’s right to be more cautious on this market and brace for continued volatility," they added. "But that negative scenario is not a forgone conclusion [...]."