empty
19.03.2025 10:51 AM
Stock market pays dear cost for Washington's rhetoric

The boomerang effect: what goes around, comes around

The US is retreating from globalization, and it is only a matter of time before it faces the consequences. According to a Bank of America survey, 69% of investors believe that American superiority is a thing of the past, leading to capital outflows and an 8.6% drop in the S&P 500 from its February highs. Since then, the stock market has lost around $5 trillion in market capitalization.

Don't set a trap for someone else—you might stumble into it yourself.

Ironically, the biggest problems for the US are coming from those who suffered the most at its hands. Trump's return to the White House led to a 20% tariff hike on China, but China struck back twice—first with DeepSeek's AI breakthrough, and then with BYD's game-changing electric vehicles.

BYD unveiled a new EV lineup capable of charging as fast as gasoline-powered cars, a blow that Tesla couldn't withstand. The stock plunged, triggering a broader selloff in the S&P 500.

The decline of US exceptionalism isn't the only reason why capital is fleeing America. Tariffs and trade wars are fueling a stagflationary scenario for the US economy. Fitch Ratings cut the 2025 US GDP growth forecast from 2.1% to 1.7%. At the same time, it raised inflation projections by 1 percentage point.

As a result, investors are dumping the "Magnificent Seven" stocks and shifting focus to companies that benefit from stagflation. Goldman Sachs' Stagflation Index has surged 14% over the past month, while the S&P 500 has lost 8.6% in the same period.

This image is no longer relevant

According to Bank of America, fund managers overseeing $426 billion in assets have slashed their US equity exposure by 40 percentage points—the fastest reduction on record.

The underweight position now stands at 23%, the highest since June 2023.

Meanwhile, European equities have reached their largest portfolio share since 2021. The direction is clear—money is flowing out of North America and into Europe.

A silver lining for the S&P 500?

However, there is one bright spot for the S&P 500. Corporate insiders are using the market correction to buy stocks. The bull-to-bear ratio has climbed to its highest level since June, returning to its historical average.

This image is no longer relevant

This image is no longer relevant

Fed's verdict will be crucial

The market is awaiting the Federal Reserve's policy decision. If the Fed follows the OECD and Fitch Ratings' advice to hold off on rate cuts in 2025, and the updated forecasts show only one or no rate cuts instead of two in December, the S&P 500 selloff could intensify.

Technical outlook: the S&P 500 fits into the bearish strategy

On the daily chart, the S&P 500 remains in a sell-off mode, following a shorting strategy at resistance near 5,670. As long as prices stay below the local high of 5,700, holding and adding to short positions makes sense. Target levels: 5,455 and 5,330.

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 Market Didn't Have Time to Get Scared

The worst was avoided. This was enough for the S&P 500 to hit a new record high — its 16th this year. U.S. inflation data for July did not signal

Marek Petkovich 09:57 2025-08-13 UTC+2

Fed Rate Cut and Breakthrough in the Ukraine Crisis to Benefit Financial Markets (Possible Bitcoin and #USDX Decline)

The inflation report published on Tuesday reinforced market participants' expectations that the U.S. central bank will cut interest rates at the September meeting, opening the way for continued growth

Pati Gani 09:44 2025-08-13 UTC+2

What to Pay Attention to on August 13? A Breakdown of Fundamental Events for Beginners

Only one macroeconomic release is scheduled for Wednesday — the second estimate of Germany's July inflation. In the EU, second estimates generally do not differ from the first, German inflation

Paolo Greco 06:58 2025-08-13 UTC+2

GBP/USD Overview – August 13: Waiting for Friday...

The GBP/USD currency pair once again traded rather sluggishly on Tuesday. In the morning, the UK released unemployment and wage data, but the figures were far too "bland." Essentially, only

Paolo Greco 03:49 2025-08-13 UTC+2

EUR/USD Overview – August 13: Trump and China Reached an Agreement — Again, Temporarily

The EUR/USD currency pair once again traded rather calmly. While the pair is not exactly stuck in place, volatility remains low. There is no clear sideways range at the moment

Paolo Greco 03:49 2025-08-13 UTC+2

Could there have been an "error" in the inflation report?

The latest U.S. inflation report, without false modesty, was striking. Despite the highest import tariffs in the United States in at least the last 50 years, inflation is barely accelerating

Chin Zhao 00:29 2025-08-13 UTC+2

Truce Reached, but No Trade Deal

On Tuesday, the dollar received its first piece of positive news in the past few weeks. The market has already forgotten that Donald Trump skillfully signed trade agreements with Japan

Chin Zhao 00:29 2025-08-13 UTC+2

EUR/USD. What Does the U.S. CPI Growth Report Indicate?

The U.S. CPI growth report reflected stagnation in headline inflation and an acceleration in core inflation. However, the release was interpreted against the dollar — the EUR/USD pair has once

Irina Manzenko 00:29 2025-08-13 UTC+2

The Dollar Breaks the Rules

To build something new, you first have to tear everything down. This is the principle Donald Trump is following in restructuring the international trade system. As a result, principles that

Marek Petkovich 00:29 2025-08-13 UTC+2

AUD/NZD. Analysis and Forecast

The AUD/NZD pair gave up moderate intraday gains after setting a new four-week high in the 1.0982–1.0983 level, following the Reserve Bank of Australia's (RBA) monetary policy decision. Nevertheless, spot

Irina Yanina 12:29 2025-08-12 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.