empty
18.03.2025 12:18 PM
Market catches fish in muddy water

Chaos in the White House's economic policy has pushed the S&P 500 to the brink. The broad stock index briefly entered correction territory before rebounding with two consecutive days of gains.

According to UBS, pullbacks in stocks traditionally create buying opportunities. The surge in political uncertainty hit the market at a time of extreme optimism when positioning was excessively bullish. By the end of March, these factors have largely been priced in.

While the share of bearish retail investors has surpassed bullish sentiment for the first time in months, institutional players are betting on a rally in the S&P 500. Evidence of this can be seen in the declining cost of hedging against a 10% drop in the index, compared to the cost of hedging for a 10% rise, which has hit its lowest levels since March 2023.

Hedging costs for S&P 500 swings

This image is no longer relevant

In addition to macro fundamentals and corporate valuations, institutional investors closely track market sentiment. When sentiment worsens, it often creates optimal conditions for buying.

Historically, after the 10 worst years for investor sentiment, the S&P 500 rebounded with an average annual return of 18.7%. Meanwhile, the average return was a mere 0.4% in the 10 most optimistic years.

Given this trend, 2025 may not bring spectacular gains for US equities, but volatility will be significant.

What's driving the current rebound in the S&P 500?

The current bounce is fueled by two key factors:

* Trade war concerns have temporarily eased. Investors are now waiting for early April when the White House is expected to implement reciprocal tariffs.

* US macroeconomic data indicates a cooling economy but not a collapse: a scenario that investors seem to welcome.

In February, retail sales rose by just 0.2% month-over-month, falling short of Bloomberg's consensus forecast of 0.6%. January's figures were revised downward, showing a 1.2% decline, though poor weather was largely to blame.

US retail sales trends

This image is no longer relevant

Markets reacted positively to the fact that retail sales did not contract for a second consecutive month, as this would have signaled a GDP contraction in Q1. With recession fears still looming, even a modest uptick in consumer spending helped ease market anxiety, providing support for the S&P 500.

This image is no longer relevant

Meanwhile, as Donald Trump focuses on ending the armed conflict in Eastern Europe, trade war fears have taken a backseat—a positive development for the broad stock index.

Technical outlook: S&P 500 rebounds off six-month lows

On the daily chart, the S&P 500 has bounced off a six-month low, making the long position from 5,645 a successful move. The strategy remains to hold long positions, targeting resistance levels at 5,750 and 5,815, with a potential reversal setup in case of rejection.

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

EUR/USD: The Dollar Falls Out of Favor Again

The euro/dollar pair has been climbing for two days, mirroring a general decline in the U.S. dollar. Having briefly regained strength, the greenback is now under pressure again: the U.S

Irina Manzenko 18:07 2025-05-14 UTC+2

AUD/JPY. Analysis and Forecast

The current technical and fundamental setup for the AUD/JPY pair points to short-term pressure from the Japanese yen. However, fundamental factors favoring the Australian dollar help maintain the pair's upside

Irina Yanina 11:28 2025-05-14 UTC+2

USD/JPY. Analysis and Forecast

At the moment, the Japanese yen is showing positive momentum against the U.S. dollar for the second consecutive day.The key factor supporting the Japanese currency has been hawkish comments from

Irina Yanina 11:28 2025-05-14 UTC+2

The Market Is Changing the Rules of the Game

Don't go against the crowd. According to Goldman Sachs and the Federal Reserve, individual investors held $35 trillion worth of U.S. stocks at the end of 2024, equivalent to 38%

Marek Petkovich 09:32 2025-05-14 UTC+2

What to Pay Attention to on May 14? A Breakdown of Fundamental Events for Beginners

There are very few macroeconomic events scheduled for Wednesday. The only item of note is the second estimate of Germany's Business Activity Index for April. Second estimates typically

Paolo Greco 06:11 2025-05-14 UTC+2

GBP/USD Overview – May 14: Only the Trade Deal Matters

On Tuesday, the GBP/USD currency pair also ended what could only be called disgrace — its decline. On Monday, the U.S. dollar strengthened quite well following a successful first round

Paolo Greco 03:52 2025-05-14 UTC+2

EUR/USD Overview – May 14: The Music Didn't Last Long

The EUR/USD currency pair experienced upward movement for most of Tuesday. One gets used to good news quickly, and the market expected further strengthening of the U.S. dollar. We anticipated

Paolo Greco 03:52 2025-05-14 UTC+2

EUR/USD. And Then They Woke Up: Market Euphoria Over the U.S.-China Trade Truce Fades

The currency market's initial euphoria following the announcement of a temporary trade truce between the U.S. and China has now faded. The early optimism has given way to the sobering

Irina Manzenko 01:23 2025-05-14 UTC+2

Inflation Does the Dollar a Bearish Disservice

One of the few indicators the market occasionally pays attention to is U.S. inflation. After Donald Trump introduced trade tariffs, economists immediately started discussing rising inflation. This conclusion is logical

Chin Zhao 01:14 2025-05-14 UTC+2

The Euro Prepares for Retaliation

Man proposes, God disposes. After the White House imposed strict tariffs on America's Independence Day, there was much discussion about rising inflation and a slowing U.S. economy. However, instead

Marek Petkovich 00:18 2025-05-14 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.