AP Photo/Richard Drew

• Investors are realizing the tax cuts and pro-business reforms will take longer to materialize than they expected.
• In the meantime, stocks and bonds are correlating with President Donald Trump's popularity (or lack thereof), Credit Suisse says.
• Adding to this pressure, stock valuations are high by any measure.

Ever so slowly, Wall Street is being shaken from the trance of President Donald Trump's promises of deregulation and tax reform.

As this happens, an entire industry known for sharing notes and trading tips is starting to worry whether it has been working off of the wrong playbook.

"When Trump's favorability initially rose after the election, equity investor optimism was driven by an intense focus on how to position for rising interest rates and improving prospects for economic/earnings growth driven by corporate tax reform, infrastructure spending, and regulatory relief," analysts at Credit Suisse wrote in a recent note. "But since Trump's favorability peaked in mid-December, that optimism has been replaced by a wait and see approach among many investors, along with a healthy dose of frustration."

The fears that are rattling the "Masters of the Universe" are varied: Baupost's Seth Klarman is worried about Trump's tax cuts and spending plan. He is also, along with Bridgewater's Ray Dalio, scared of populism and trade wars. Greenlight Capital's David Einhorn is worried about inflation, and Elliott Management's Paul Singer worries that the world has gone complacent.

He's right. It has. That means it's time to be afraid of the stock market.

First things first; next things, perhaps never

The "frustration" Credit Suisse is describing comes from the fact that investors don't know when the plans they like will actually be enacted, while measures that are actually disconcerting to investors — immigration bans, trade-war mongering, and healthcare uncertainty — have taken center stage.

They are also frustrated that details of plans they thought they liked could hurt some industries. Think, for example, what the border-tax element of Trump's plans — essentially a tax on importers — could do to retailers like Kohl's, Lululemon, and Urban Outfitters that make their products abroad and sell them at home.

Messages from the administration have not been reassuring. Peter Navarro, the head of Trump's National Trade Council, dismissed as "fake news" Wall Street analysis that concluded retailers would be hurt and jobs would be lost through the border-adjustment tax.

Navarro has, so far, been the clearest messenger of Trump's — and top adviser Steve Bannon's — vision for the economy: taking resources away from the services economy we have, and recreating the manufacturing economy we used to have, to save jobs.

"We envision a more Germany-style economy, where 20% of our workforce is in manufacturing," Navarro told CNBC in a recent interview. This comment, as we've pointed out before, compares apples to oranges. The US manufacturing sector alone would be the eighth-largest economy in the world. Germany's entire economy is the fourth largest in the world.

This is not an idea Wall Street signed up for.

Trading on Trump

But let's say Wall Street does get a few things on its wish list, even though House Speaker Paul Ryan says they won't materialize until 2018.

In that event, according to Credit Suisse, we still have a problem: "Investors have been asking how valuations look on 2018 EPS, when it is becoming more likely ... that stock market friendly policy changes in Washington could materialize. On current 2018 expectations, US stocks still look highly overvalued."

The charts below trace forward-looking price-to-earnings ratios all the way back to the mid-1980s:

Perhaps more disconcerting to Credit Suisse — and this correspondent — than any of these things is that the stock market and a few macroeconomic indicators are actually trading on Trump's favorability right now. (For more on that, see the slides below).

It seems as if Wall Street has given up the difficult work of picking stocks and making models, of calling experts and building theories. Instead it is allowing the market to try to figure out whether the president can handle his new job. Of course, it's unclear how long that will take.

As a result, 10-year Treasury yields, the dollar, crude oil, small-cap stocks, financial stocks, high-tax-paying stocks, and more are correlated to Trump's favorability.

This is a delicate state, to say the least. The American people don't like it when their president is rattled, and we know it doesn't take much to rattle Trump – a skit on "Saturday Night Live," poor sales at his daughter's company, The New York Times reporting the truth. It could be anything.

And you don't want to be in a stock market that can move on just anything.

Stocks and yields are correlated to Trump's favorability. (Red is Trump's favorability rating, blue is the market).

The US dollar and crude oil also appear to be trading on Trump.

Large-cap stocks also seem to have caught the bug, depending on what they pay in taxes. It seems as if low-tax payers get hurt when Trump's favorability is high — a sign the market thinks it will be easier for him to pass tax reform.