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

The Fed Is Right—It's Too Early to Cut Rates (I Expect a Decline in #SPX and an Increase in Gold Prices)

The fresh U.S. Consumer Price Index (CPI) data released on Wednesday, although below the consensus forecast, confirmed the persistence of inflationary pressure. This fully justifies the Federal Reserve's reluctance

Pati Gani 10:37 2025-06-12 UTC+2

Trump Threatens Tariffs Again – Markets React

President Donald Trump announced yesterday that he intends to send letters to trade partners within the next one to two weeks outlining unilateral tariff rates. This is ahead

Jakub Novak 09:10 2025-06-12 UTC+2

What to Pay Attention to on June 12? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are set for Thursday, but only a few are truly important. The key reports to highlight are the GDP and industrial production data from

Paolo Greco 05:52 2025-06-12 UTC+2

GBP/USD Overview – June 12: Protests Against Trump and Fed Policy

The GBP/USD currency pair continued to trade very calmly on Wednesday. Naturally, when U.S. inflation data was released, we saw a brief burst of market reaction—though it didn't last long

Paolo Greco 04:07 2025-06-12 UTC+2

EUR/USD Overview – June 12: Is There Light at the End of the Tunnel?

The EUR/USD currency pair continued to trade very calmly throughout Wednesday. The market showed no reaction whatsoever to the seemingly positive news regarding U.S.-China trade negotiations. Why? Because that positivity

Paolo Greco 04:07 2025-06-12 UTC+2

Donald Trump Plans to Suppress the Uprising

For several consecutive days, protests and unrest have continued in some major U.S. cities, sparked by Donald Trump's new immigration policy. This time, the U.S. President has decided to deport

Chin Zhao 00:35 2025-06-12 UTC+2

EUR/USD. In the Shadow of the Trade Deal: U.S. Inflation Report Pressures the Greenback

A mixed U.S. inflation report pressured the greenback. The dollar index returned to 98.00, while the EUR/USD pair refreshed its weekly high, rising to 1.1491. Additional pressure on the U.S

Irina Manzenko 00:35 2025-06-12 UTC+2

Will the Dollar Maintain the Status Quo?

To make accurate predictions about the future, one must examine the past. The more than 10% rally in EUR/USD since the beginning of the year has been driven by four

Marek Petkovich 00:35 2025-06-12 UTC+2

XAU/USD. Analysis and Forecast

Currently, the price of gold remains confined within a weekly range. The key factors supporting price growth include a decision by the U.S. federal appellate court to uphold President Donald

Irina Yanina 18:35 2025-06-11 UTC+2

USD/JPY. Analysis and Forecast

At this stage, the Japanese yen continues to trade within an intraday consolidation range, approaching the two-week low against the U.S. dollar reached yesterday. The main factors influencing the movement

Irina Yanina 18:33 2025-06-11 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.