empty
23.04.2025 12:35 PM
Market walks through minefield

If the market can rally this much on hints from Treasury Secretary Scott Bessent about de-escalation in the trade conflict with China, imagine how high the S&P 500 could jump if tariffs are actually lowered! Optimists are searching for reasons to buy US stocks, but Wall Street's veterans caution that the bear market is far from over. Beware of "fake outs" in the middle of a long-term downturn! Major players appear to be staying on the sidelines, leading to a 17% drop in trading volumes for the broad market index compared to historical averages.

When the market faces a ceiling of uncertainty from White House import tariffs and a looming US recession, and S&P 500 declines tempt investors to "buy the dip," sharp swings in either direction become a hallmark of the stock market. The trick is to determine when the rally will start to outpace the declines.

S&P 500 volatility during market pullbacks

This image is no longer relevant

This time, the bounce in the broad market index was triggered by conciliatory rhetoric from Donald Trump and his team. The president has said he does not intend to fire Jerome Powell from the Federal Reserve chair, only that he wishes Powell were more active in cutting rates. The Republican leader is not looking to be tough on China and believes that 145% tariffs are excessive. In reality, they will be much lower but not zero.

No matter how hard the White House tries to support the S&P 500 with conciliatory language, regaining lost trust is not so simple. Societe Generale points out that for decades, investors had no alternative to American stocks, which led to inflated valuations for both US equities and the dollar. Now, there is an ongoing rotation from US assets into those of other regions, a process that could last for years.

S&P 500 and USD trends

This image is no longer relevant

UBS expects the broad market index to decline in the short term but does not rule out a recovery to 5,500 by year-end if tariffs are significantly reduced.

In my view, the decisive factor will be whether the United States slips into recession or not. The IMF does not see a downturn yet but has raised the probability to 40%. Conversely, the Institute of International Finance forecasts US GDP to contract by 0.8% in the third quarter and 0.3% in the fourth, which would force the Fed to cut the federal funds rate three times by the end of 2025.

This image is no longer relevant

It is clear the White House understands it has gone too far but restoring investor confidence will not be easy.

On the daily chart of the S&P 500, the key question is whether bulls will activate a 1-2-3 reversal pattern. This requires a return to the 5,400 pivot level followed by a successful breakout. A rejection at this level would allow the expansion of previously built short positions. Conversely, a breakout would be grounds to reverse and take long positions.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Igor Kovalyov
Start trade
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 supported by moderate USD weakness and trade-related uncertainty

Today, gold is trading higher, remaining within a sideways trend. Late Thursday, Federal Reserve official Christopher Waller stated that rising risks to the economy could justify a key rate

Irina Yanina 19:15 2025-07-18 UTC+2

AUD/USD. Analysis and Forecast

Today, the AUD/USD pair climbed above the key psychological level of 0.6500, attempting to confirm its recent positive momentum. The main driver behind the Aussie's rise is the weakening

Irina Yanina 13:49 2025-07-18 UTC+2

USD/CAD. Analysis and Forecast

Today, Friday, the USD/CAD pair is pulling back from a three-week high near 1.3775 recorded yesterday. At the moment, prices are trading slightly below the 1.3730 level, showing a modest

Irina Yanina 13:38 2025-07-18 UTC+2

The European Central Bank May Postpone Its Rate Cut Until December

While the euro attempts to stage a correction against the U.S. dollar, a survey of economists suggests that the European Central Bank may delay its final interest rate cut until

Jakub Novak 11:37 2025-07-18 UTC+2

Powell Responds to White House Criticism

Lately, Federal Reserve Chair Jerome Powell has faced increasing pressure, coming under fire from lawmakers, the White House, and U.S. President Donald Trump. In a letter sent on Thursday, Powell

Jakub Novak 11:26 2025-07-18 UTC+2

The U.S. Begins Regulating the Digital Currency Market (Potential for a Correction in Bitcoin and EUR/USD)

The U.S. House of Representatives has passed bills establishing the first federal framework for dollar-backed stablecoins and setting regulations for other digital currencies. The idea of regulating the cryptocurrency market

Pati Gani 09:28 2025-07-18 UTC+2

The Market Favors a Weak Dollar

What could be better for the S&P 500 than a Federal Reserve rate cut amid a still-strong economy? A series of positive labor market and retail sales data, combined with

Marek Petkovich 09:28 2025-07-18 UTC+2

What to Pay Attention to on July 18? A Breakdown of Fundamental Events for Beginners

Several macroeconomic reports are scheduled for release on Friday, but none of them are of major importance. The only noteworthy release is the University of Michigan Consumer Sentiment Index

Paolo Greco 06:13 2025-07-18 UTC+2

GBP/USD Overview – July 18: Is the Market Tired of the Dollar and Trump?

The GBP/USD currency pair once again leaned toward decline on Thursday. After the British pound strengthened on Wednesday evening following another report about Powell's dismissal, the dollar quickly recovered. However

Paolo Greco 03:56 2025-07-18 UTC+2

EUR/USD Overview – July 18: Trump Will Keep Trying to Fire Powell for Another Year

The EUR/USD currency pair continued its steady decline throughout Thursday. As a reminder, the forex market experienced an "explosion" on Wednesday evening. Donald Trump once again attempted to either fire

Paolo Greco 03:56 2025-07-18 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.