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
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

USD/JPY – Analysis and Forecast

The Japanese yen halted its intraday decline after Prime Minister Shigeru Ishiba downplayed the significance of recent media reports suggesting his resignation. News from Japan and the United States continues

Irina Yanina 13:23 2025-07-23 UTC+2

XAU/USD – Price Analysis and Forecast

News from the United States and Japan is significantly impacting the price dynamics of the precious metal. President Donald Trump announced the conclusion of a major trade deal with Japan

Irina Yanina 13:18 2025-07-23 UTC+2

AUD/JPY. Analysis and Forecast

On Wednesday during the Asian session, the AUD/JPY pair posted solid gains, extending a moderate rebound from the two-week low recorded the day before. However, spot prices have slightly pulled

Irina Yanina 11:53 2025-07-23 UTC+2

U.S.-Japan Deal Eases Market Tensions (Possible Decline in Ethereum and Litecoin)

An unexpected announcement from Donald Trump that the U.S. has struck a "major deal" with Japan gave investors a sense of relief, fueling demand for company stocks and reducing overall

Pati Gani 10:22 2025-07-23 UTC+2

The Market Faces a Cold Shower

If something seems too good to be true, it probably is. The S&P 500 remains stuck in indecision near its all-time high, showing little reaction to positive developments. Neither

Marek Petkovich 09:01 2025-07-23 UTC+2

What to Pay Attention to on July 23? A Breakdown of Fundamental Events for Beginners

No significant macroeconomic reports are scheduled for Wednesday. The event calendars for the Eurozone, Germany, and the United Kingdom are empty, while in the United States, a report

Paolo Greco 06:51 2025-07-23 UTC+2

GBP/USD Overview – July 23: The Powell–Trump Showdown: A Matter of Principle and Honor

On Tuesday, the GBP/USD currency pair maintained its upward bias, although it failed to post significant gains throughout the day. However, this is not an issue. The U.S. dollar

Paolo Greco 03:33 2025-07-23 UTC+2

EUR/USD Overview – July 23: Donald Trump Keeps Promising and Pressuring the EU

On Tuesday, the EUR/USD currency pair maintained the beginning of a new leg of its upward trend. A day earlier, the price had consolidated above the moving average line, which

Paolo Greco 03:33 2025-07-23 UTC+2

The EU Prepares an "Anti-Coercion Package"

As I mentioned in the previous review, the European Union has tools to respond to Donald Trump. European officials' reluctance to enter into a full-scale conflict is understandable. First

Chin Zhao 00:53 2025-07-23 UTC+2

Trump Is Squeezing the EU Dry

When Donald Trump comes to power, you can't help but feel glad you don't live in the United States of America. Of course, that's a joke—but as with any joke

Chin Zhao 00:53 2025-07-23 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.