empty
16.04.2025 11:39 AM
Time works against market

Time is not on Donald Trump's side, nor the side of the US stock market. The longer the uncertainty surrounding White House policy drags on, the more likely it becomes that negative tariff news will impact the American economy. What is bad for the economy is bad for the S&P 500. No surprise then that JP Morgan has revised its year-end forecast for the broad equity index down from 6,500 to 5,200. For now, however, investors are staying on the sidelines.

They are spooked by the mixed messages coming from the White House. One moment, Trump is granting tariff exemptions for electronics and hinting at relief for the auto industry. Next, his administration launches an investigation that could result in tariffs on pharmaceutical and semiconductor imports.

P/E dynamics on US and European stocks

This image is no longer relevant

At one point, the president calls on China to resume negotiations. At another, a Wall Street Journal insider claims that America's real goal in negotiating tariff rollbacks with other countries is to isolate Beijing. The contradictions are so numerous that the S&P 500 has stalled, while capital continues to rotate into still-undervalued European equities.

Meanwhile, surveys from Bank of America suggest that the broad market index could resume its downward path. About 82% of respondents, managing a combined $386 billion, believe the global economy will weaken. However, their average cash allocation is just 4.8%, compared to the 6%+ typically seen when fear dominates the market. When fund managers are strongly bearish on macro conditions but not fully bearish on the S&P 500's outlook, it signals that the market's downside potential hasn't yet been exhausted.

Share of investors planning to divest from US equities

This image is no longer relevant

In April, Bank of America respondents reported an underweight position in US equities of 3%, down sharply from a 17% overweight in February, the largest two-month drop on record. A record number of asset managers now plan to divest from US stocks in the near future.

This image is no longer relevant

That is hardly surprising, given the unpredictable consequences of the trade war. China, aware it cannot win outright, is turning to unconventional tactics, offloading US Treasuries and obstructing American companies. The ban on Boeing aircraft purchases, for instance, sent the company's shares tumbling. The trade skirmish is already impacting US exporters, who collectively account for about 11% of GDP. The economy is clearly cooling and a recession may be closer than it seems.

On the daily chart, the S&P 500 is currently testing the key pivot level at 5,400. If bulls fail to keep prices above it, it will signal weakness and may trigger a wave of selling in the broader index, long before any resistance tests at 5,500 or 5,600 even come into play.

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

U.S. Trade Deficit Hits Record High in March

The euro responded with an increase following the news that the U.S. trade deficit rose to a record level in March this year, as companies rushed to import goods, including

Jakub Novak 10:48 2025-05-07 UTC+2

Markets Will Not Be Dictated To

The market's eyes have finally opened. Donald Trump is not the kind of president who would lower tariffs in response to reciprocal reductions from other countries. The occupant

Marek Petkovich 09:56 2025-05-07 UTC+2

Is It Worth Hoping for a Strong Market Rally? (There is a high probability of continued growth in #SPX and #NDX)

Equity markets have improved, demand for cryptocurrencies has risen, yet gold prices dropped sharply after a local rally. Meanwhile, the U.S. dollar has remained almost unchanged against major currencies

Pati Gani 09:28 2025-05-07 UTC+2

USD/JPY: Is Further Decline Inevitable?

The Bank of Japan left its monetary policy unchanged during the monetary policy meeting on May 1. In the "Outlook for Economic Activity and Prices" report, the Bank lowered

Kuvat Raharjo 09:28 2025-05-07 UTC+2

Gold Returns to Growth

Gold has resumed its upward movement as investors analyzed trade-related comments from U.S. Treasury Secretary Scott Bessent while awaiting the Federal Reserve's decision on interest rates. Bessent recently stated that

Jakub Novak 09:14 2025-05-07 UTC+2

What to Pay Attention to on May 7? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic events are scheduled for Wednesday, and in any case, they are unlikely to have any meaningful impact on either of the currency pairs. The euro remains

Paolo Greco 06:55 2025-05-07 UTC+2

GBP/USD Overview – May 7: Trump Didn't Get a Call from China, Had to Back Down

On Tuesday, while the euro remained stuck in a flat trend, the GBP/USD currency pair began a new upward move. The rally started on Monday, but during the U.S. session

Paolo Greco 03:35 2025-05-07 UTC+2

EUR/USD Overview – May 7: The Fed Meeting Becomes the Dollar's New "Headache"

The EUR/USD currency pair continued to trade strictly sideways on Tuesday. The broader flat market has now lasted for nearly a month, and in addition to that, the market seems

Paolo Greco 03:35 2025-05-07 UTC+2

Trade War as Part of Global Confrontation

Many may believe that the trade war initiated by Donald Trump is simply a tool to reduce the budget deficit and national debt. However, it becomes clear upon closer examination

Chin Zhao 01:06 2025-05-07 UTC+2

May FOMC Meeting: A Preview

We'll learn the results of the Federal Reserve's latest policy meeting on Wednesday. On one hand, it's a routine event with a predetermined outcome. On the other hand, the currency

Irina Manzenko 00:32 2025-05-07 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.