empty
03.04.2025 10:49 AM
Markets enter warpath

Donald Trump confidently speaks about America's return to its Golden Age. From his viewpoint, it's time for America to prosper, rather than other countries. However, why does the US president consistently announce his decisions during stock market closures? Investors have figured out that the White House leader has no intention of throwing a lifeline to the S&P 500, but it's painful for him to watch the broad stock index sink. Futures for the S&P 500 plunged 4% after the announcement of a 10% tariff on all US imports. I fear this is just the beginning.

The three-day rally of the S&P 500 ahead of America's Liberation Day reflected hopes that Donald Trump's new tariffs would not be as scary as many had feared. Investors also hope that the US president will leave room for negotiations to lift them. Eventually, the uncertainty will clear up, allowing stock bulls to buy during dips.

The dynamics and structure of US foreign trade

This image is no longer relevant

The reality turned out to be much tougher. The universal 10% tariff on all US imports is just the beginning compared to tariffs on individual countries from Scott Bessent's "dirty fifteen" list. The European Union faces a 20% tariff, Japan 24%, and China 34%. If you add the latter number to the previously announced 20% tariff for 2025 and then add the existing tariffs from this year, it almost totals 70%. And how could these countries not retaliate?

The European Union intends to do the same if negotiations with the US fail. Japan is currently demanding the removal of tariffs. But who knows how long it will take for Japan to join the ranks of the world's power players? Unlike 2018-2019, Donald Trump will not just be fighting with Beijing. Defeating the rest of the world is no easy task.

For the S&P 500, this means that market sentiment remains obscure about further prospects of the US economy. The VIX fear index spiked above the critical 20 level, stock indices worldwide are falling into the abyss, and the yield on 10-year Treasury bonds is heading toward 4%. It's as if they want a recession or are calling for help from the Federal Reserve.

US Treasury yield dynamics

This image is no longer relevant

This image is no longer relevant

Donald Trump's envisioned scenario of events is clearly stagflationary. It's no surprise that banks and companies, including Capital Economics, are raising inflation forecasts by an average of 2.5 percentage points while lowering GDP predictions. Such an environment is unfavorable for stocks. However, the resilience of the S&P 500 signals that the broad stock index is not fully accounting for the risks of a downturn in the US economy. If it does happen, the selloff will snowball.

Technically, the daily chart of the S&P 500 still suggests a chance of the Double Bottom reversal pattern materializing. However, if the broad stock index fails to hold above its fair value of 5,670 or return to it after an opening gap, it will provide grounds for selling toward 5,500 and 5,400. It makes sense to benefit from the increase after a gap to open short positions.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Trump Again Criticizes the Fed for Being Too Slow

On Wednesday, the U.S. dollar sharply declined against major currencies after President Donald Trump stated that he has three or four candidates in mind to replace Federal Reserve Chair Jerome

Jakub Novak 10:59 2025-06-26 UTC+2

Investors Recall the Chronic Weakness of the Dollar (Further Decline in #USDX and USD/JPY Possible)

The markets continue to be dominated by the theme of Iran-Israel negotiations, previously initiated by the United States. Whether actual agreements are reached or not will have a noticeable impact

Pati Gani 09:19 2025-06-26 UTC+2

The Market Has Found a Cure for All Troubles

It seems that the heavens are aligned with Donald Trump's desires. The U.S. President's successes in the Middle East have led to a new perspective on the policies pursued

Marek Petkovich 09:04 2025-06-26 UTC+2

What to Pay Attention to on June 26? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Thursday, and the market this week has shown a clear intention to continue the upward trend that has lasted for five months. Yesterday

Paolo Greco 07:16 2025-06-26 UTC+2

GBP/USD Overview – June 26: July 9 Is Approaching

The GBP/USD currency pair remained stagnant for most of Wednesday. Let's recall an old technical signal: if the price updates a significant extreme and immediately pulls back, there

Paolo Greco 03:39 2025-06-26 UTC+2

EUR/USD Overview – June 26: Jerome Powell Said Nothing New

The EUR/USD currency pair remained completely calm throughout Wednesday. Let's recall that this week began with a storm, provoked—of course—by Donald Trump, who first announced a ceasefire between Iran

Paolo Greco 03:39 2025-06-26 UTC+2

The Euro Regains the Initiative

The euro is attempting to resume its upward movement, although not many economic reasons support this scenario. Inflation in May rose in line with the ECB's expectations, which only strengthened

Kuvat Raharjo 00:43 2025-06-26 UTC+2

The Dollar Walks a Razor's Edge

Markets were prepared for a ceasefire in the Middle East. But are they ready for the return of trade wars? Investors have come to believe in maintaining a universal import

Marek Petkovich 00:42 2025-06-26 UTC+2

Yen Is Back in the Game

The yen failed the test as a safe-haven currency. The Israel–Iran conflict triggered a correction in USD/JPY toward a downtrend. For most of the year, investors had the impression that

Marek Petkovich 00:41 2025-06-26 UTC+2

EUR/USD. Pushing the Limits: Buyers Target the 1.1630 Resistance Level

For the second day in a row, the EUR/USD pair is testing the 1.16 level, pressing against the 1.1630 resistance level (the upper line of the Bollinger Bands indicator

Irina Manzenko 19:03 2025-06-25 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.