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

XAU/USD. Analysis and Forecast

Gold is showing positive momentum as it attempts to hold above the $3300 level, indicating growing investor interest in this traditional safe-haven asset. The uncertainty surrounding U.S.-China trade relations—highlighted

Irina Yanina 11:33 2025-04-24 UTC+2

Trump Is Playing a Game Where Everyone Loses

According to a senior official at the European Central Bank, President Donald Trump has drawn the entire world into a game where everyone ends up losing — referring

Jakub Novak 11:21 2025-04-24 UTC+2

Trump Desperately Needs a Deal with China

The U.S. dollar surged sharply against most major currencies after President Donald Trump stated that he plans to be very "courteous" with China in any trade talks and that tariffs

Jakub Novak 11:16 2025-04-24 UTC+2

The Fed Needs More Time to Assess the Situation

While Donald Trump is attempting to reach an understanding with China, Federal Reserve Governor Adriana Kugler stated that the current tariff policy is likely to exert upward pressure on prices

Jakub Novak 10:05 2025-04-24 UTC+2

Powell Can Sleep Soundly

Markets responded with gains, and the US dollar strengthened against the euro and other risk assets after US President Donald Trump said he had no intention of firing Federal Reserve

Jakub Novak 09:59 2025-04-24 UTC+2

The Markets Have Likely Already Passed the Bottom of Their Decline (there is a chance of continued decline in EUR/USD and GBP/USD)

While markets remain focused on trade wars, particularly between the U.S. and China, incoming economic data indicate persistent structural problems in the advanced economies of Europe and the United States

Pati Gani 09:38 2025-04-24 UTC+2

What to Pay Attention to on April 24? A Breakdown of Fundamental Events for Beginners

Few macroeconomic events are scheduled for Thursday, but yesterday's developments showed that the market continues to ignore the majority of data releases. Only a handful of reports are lucky enough

Paolo Greco 06:05 2025-04-24 UTC+2

GBP/USD Overview – April 24: Didn't work out? So be it...

On Wednesday, the GBP/USD currency pair managed to avoid a substantial decline, although the day before, it seemed that a downtrend was finally beginning. However, the market quickly bounced back

Paolo Greco 03:16 2025-04-24 UTC+2

EUR/USD Overview – April 24: Is it really about Powell?

The EUR/USD currency pair refrained from continuing its decline on Wednesday. As the saying goes, "Everything in moderation." The dollar gained around 200 pips on Tuesday, which shouldn't scare anyone

Paolo Greco 03:16 2025-04-24 UTC+2

The Kiwi Has a Decent Chance to Continue Rising

Inflation in New Zealand in Q1 came in slightly above expectations, rising from 2.2% to 2.5% year-over-year. This was mainly due to the goods sector, while core inflation is slowing

Kuvat Raharjo 00:59 2025-04-24 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.