empty
04.03.2025 11:25 AM
The Market Goes All-In

The U.S. president is playing big. The S&P 500 recorded its worst drop of 2025 in response to the White House imposing tariffs against Mexico and Canada. For a long time, investors complained that the market was overly confident. They believed that Donald Trump's tariff threats were merely a negotiation tactic and that he would never push things to the extreme, as he wouldn't want to sink the stock index. March brought a reckoning for this overconfidence.

The S&P 500 alternated between daily losses and gains of at least 1.5% for three consecutive trading sessions, something that hasn't happened since March 2020. The rebound on March 2 seemed to confirm the perfect opportunity to buy the dip, especially since Mexico agreed to impose reciprocal tariffs on Chinese imports, and a White House official hinted that the 25% tariff rate could be lowered.

However, Goldman Sachs warns that now is not the time to buy the S&P 500 dip. The U.S. economy is showing signs of cooling, and restoring an upward trend in the broad stock index requires something entirely different. The return of American exceptionalism and the so-called "Goldilocks economy" is absent from the market. As a result, Treasury bonds are outperforming stocks.

Stock and Bond Yield Performance

This image is no longer relevant

A fundamental shift is occurring in the so-called "Trump Trade." In Q4 2024, expectations that tariffs would drive inflation higher and force the Fed to keep the federal funds rate elevated for an extended period led to bond sell-offs and rising yields. Meanwhile, stocks rose on hopes of fiscal stimulus and deregulation.

At the beginning of spring, investors are more fearful of stagflation and a hard landing for the U.S. economy than inflation. This is accelerating capital outflows from equity-focused funds. The movement of money isn't just shifting into bonds but also into other markets.

Capital Flows into Equity-Oriented ETFs

This image is no longer relevant

One of the primary beneficiaries of this shift is Europe. Initially, European stock indices gained because Donald Trump chose to impose tariffs on Canada, Mexico, and China rather than the EU. At the start of March, gains were further fueled by the U.S. suspending military aid to Ukraine. This forces the European Union to increase defense spending, which, in theory, should boost industrial production and accelerate GDP growth.

This image is no longer relevant

Competition from Chinese companies in the artificial intelligence sector is also stripping the S&P 500 of its key growth driver—American exceptionalism. U.S. stock indices are now losing not only to Treasury bonds but also to European equities.

Technical Analysis

On the daily chart, the S&P 500 continues to follow the Broadening Wedge pattern. The rebound from resistance at 5955 provided another opportunity to add to the short positions formed from 6083. The first set of previously outlined targets at 5830 and 5750 has been met. The second target is now in focus.

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

The Fed Will Maintain Its Wait-and-See Approach

The Federal Reserve is widely expected to leave its current monetary policy settings unchanged at today's meeting. As a result, there is little intrigue surrounding the decision. No updates

Chin Zhao 21:09 2025-07-30 UTC+2

USD/CAD. Analysis and Forecast

On Wednesday, the USD/CAD pair enters a phase of bullish consolidation, fluctuating just below the five-week high reached the day before. Traders are holding off on aggressive positions ahead

Irina Yanina 12:49 2025-07-30 UTC+2

USD/JPY. Analysis and Forecast

During the Asian session today, the Japanese yen strengthened against the weakening U.S. dollar. However, the yen's upward potential is likely to remain limited, as traders may hold

Irina Yanina 12:23 2025-07-30 UTC+2

Trump's Trade Deals Lack Sufficient Detail

It's clear that the Federal Reserve's hesitation to cut interest rates due to inflation risks at home is partly justified by the lack of substantive details in the trade agreements

Jakub Novak 11:35 2025-07-30 UTC+2

Why Are Markets Riding a Wave of Optimism? (There is a likelihood of rising oil prices and declining gold prices)

Recent events—including victorious declarations from Washington about agreements on customs tariffs with Japan and the EU—continue to support demand for risk assets. At least for now, investors are not concerned

Pati Gani 10:16 2025-07-30 UTC+2

The Fed Unlikely to Send Clear Signals

While the euro and British pound show modest gains against the U.S. dollar, investors hoping for Jerome Powell to hint that the Federal Reserve is moving closer to a rate

Jakub Novak 09:54 2025-07-30 UTC+2

The Market Welcomes the Truce

The final word in the U.S.–China trade negotiations is expected from Donald Trump. Until that happens, the S&P 500 has decided to take a step back—especially with key U.S. data

Marek Petkovich 09:05 2025-07-30 UTC+2

What to Pay Attention to on July 30? A Breakdown of Fundamental Events for Beginners

A considerable number of macroeconomic reports are scheduled for Wednesday. Germany, the Eurozone, and the United States will all release Q2 GDP reports. It is worth noting that while

Paolo Greco 07:07 2025-07-30 UTC+2

GBP/USD Overview – July 30: The Pound Keeps Falling "in Sympathy"

The GBP/USD currency pair continued its decline on Monday and extended the move into Tuesday. It's worth noting that the British pound began falling earlier than the euro, already last

Paolo Greco 03:48 2025-07-30 UTC+2

EUR/USD Overview – July 30: Beating the Fallen

The EUR/USD currency pair continued its downward movement on Tuesday, driven by the same factors as on Monday—as we warned in advance. On Monday, it was revealed that the European

Paolo Greco 03:48 2025-07-30 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.