empty
17.06.2025 11:07 AM
Market may be falling into same trap again

History is repeating itself. Ahead of America's Independence Day, many market participants were saying that Donald Trump's bark was worse than his bite — suggesting the US president issued many threats but took little actual action. Reality proved otherwise: back then, the S&P 500 suffered a significant decline due to large-scale tariffs. Now, the index risks falling into the same trap again. Investors seem to believe that geopolitical risks are all bark and no bite.

Rumors of Iran's willingness to resume negotiations over its nuclear program were enough for retail investors to step in and buy the dip in the S&P 500. According to JP Morgan, retail investors purchased $23 billion worth of US equities in May alone. In early June, some players began taking profits, resulting in net sales of $400 million. However, any fresh attempts by the broad index to resume its uptrend are likely to attract new bulls.

The fading enthusiasm may also be due to the typical summer lull in the stock market. Derivatives suggest that the S&P 500 is likely to trade within a daily range of less than 1% for most of July. Key catalysts that could trigger more significant moves include upcoming US labor market reports and the Federal Reserve's policy meeting.

Projected fluctuations in S&P 500

This image is no longer relevant

In reality, Iran's interest in negotiations does not guarantee the end of the armed conflict. Tehran hopes to avoid direct US involvement on Israel's side. It knows that Jerusalem is not equipped for a prolonged campaign and is stalling for time. According to RBC Capital Markets, the S&P 500 could drop by as much as 20% if the Middle East conflict spreads to other countries and drags on. Such a scenario would be a clear negative for US stocks, hurting consumer sentiment, the broader US economy, and potentially prompting a hawkish shift from the Federal Reserve.

Indeed, Iran remains one of the world's largest oil producers. Bombings targeting oil infrastructure push Brent and WTI prices higher. Moreover, Tehran has the capability to block the Strait of Hormuz — a vital artery for Middle East oil exports to Europe. This could drive gasoline prices sharply higher in the US, making it difficult for the Fed to resume its easing cycle before year-end. Higher interest rates would clearly weigh on US equities.

Risks are also building on the trade front. The US has failed to nail down trade deals with Canada, Japan, and several other nations. As the 90-day grace period expires in early July, the likelihood of renewed trade wars grows.

This image is no longer relevant

Technical outlook for S&P 500

Technically, bulls on the S&P 500 are attempting to reclaim the key pivot level at 6,060 on the daily chart. As long as the broad index remains below this level — or if bullish attempts to break through it fail again — selling on rallies remains a valid strategy.

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 prices are maintaining positive momentum for the second consecutive day. Ongoing uncertainty surrounding U.S. President Donald Trump's trade policy and its impact on the global economy continues to weigh

Irina Yanina 19:24 2025-07-10 UTC+2

USD/CHF. Analysis and Forecast

Today, the USD/CHF pair retraced part of its decline from a new weekly low recorded during the Asian session and has temporarily paused its downward movement, stopping short

Irina Yanina 12:26 2025-07-10 UTC+2

Market dupes sellers

The split within the Federal Reserve, NVIDIA's successes, and a successful auction of 10-year US Treasury bonds allowed the S&P 500 to ignore the tariff chaos. Donald Trump announced tariffs

Marek Petkovich 12:02 2025-07-10 UTC+2

What to Watch on July 10th: Fundamental Event Overview for Beginners

Macroeconomic Report Analysis: There are very few macroeconomic publications scheduled for Thursday, and none of them are expected to be significant. So what could traders focus on today? The second

Paolo Greco 09:07 2025-07-10 UTC+2

GBP/USD Overview on July 10, 2025

On Wednesday, the GBP/USD currency pair maintained its downward movement, which is corrective in nature and could end at any moment. The price remained below the moving average line

Paolo Greco 07:26 2025-07-10 UTC+2

EUR/USD Overview on July 10, 2025

The EUR/USD currency pair continued to trade very calmly on Wednesday. The pair maintained a slight downward bias, as we've noted in all of our recent articles. However, the current

Paolo Greco 07:16 2025-07-10 UTC+2

USD/CAD. Analysis and Forecast

Today, the USD/CAD pair is showing signs of recovery, rising toward the 1.3700 level and approaching the weekly high reached earlier. Fundamental factors point to bullish dominance and the potential

Irina Yanina 12:46 2025-07-09 UTC+2

Markets unfazed by Trump's new tariff threats

Donald Trump's bark is louder than his bite. Markets have grown so accustomed to his rhetoric that the S&P 500 barely flinched at the White House's latest threat to slap

Marek Petkovich 11:53 2025-07-09 UTC+2

AUD/USD. Analysis and Forecast

The AUD/USD pair is holding steady at current levels with a bullish bias but limited movement following the release of inflation data from China—Australia's key trading partner. In June

Irina Yanina 11:35 2025-07-09 UTC+2

USD/JPY. Analysis and Forecast

On Wednesday, the Japanese yen extended its decline for the third consecutive day, pushing the USD/JPY pair to a new two-week high above the key 147.00 level during the Asian

Irina Yanina 11:23 2025-07-09 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.