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

EUR/USD Overview – May 26: The Dollar Isn't Amused by Trump's Jokes

The EUR/USD currency pair continued trading higher on Friday, but who can be surprised by yet another drop in the dollar at this point? The U.S. currency has been falling

Paolo Greco 03:44 2025-05-26 UTC+2

EUR/USD Weekly Preview: FOMC Minutes, Core PCE Index, U.S. GDP

The upcoming week promises to be volatile. First, several significant macroeconomic reports will be released in the U.S. Second, the intrigue surrounding Donald Trump's new tariffs on EU goods

Irina Manzenko 02:30 2025-05-26 UTC+2

U.S. Dollar: Weekly Preview

The U.S. dollar remains at the center of attention and "at the head of the table." It is the first currency to respond to changes in Donald Trump's foreign

Chin Zhao 00:49 2025-05-26 UTC+2

British Pound: Weekly Preview

While the Eurozone may have a quiet week ahead, with markets focused on Trump's following remarks and the EU's potential response, there will be virtually no significant events

Chin Zhao 00:49 2025-05-26 UTC+2

Euro: Weekly Preview

The week demonstrated only one thing — the news flow surrounding Donald Trump and the trade war remains the dominant, if not the only, driving factor for the market

Chin Zhao 00:49 2025-05-26 UTC+2

Gold Rebounds as Fiscal Risks Resurface

Gold is swinging between extremes as spring draws to a close. The week ending May 16 was the worst for the precious metal due to optimism that, following a trade

Marek Petkovich 17:31 2025-05-23 UTC+2

AUD/JPY. Analysis and Forecast

Today, the AUD/JPY pair has started to attract buying interest, halting its pullback from the monthly high as demand for the Australian dollar emerges. Today's talks between U.S. Deputy Secretary

Irina Yanina 17:25 2025-05-23 UTC+2

USD/CAD. Analysis and Forecast

The pair is trending lower, dropping close to the key psychological level of 1.3800 amid broad-based U.S. dollar weakness. Traders have raised their expectations for Federal Reserve rate cuts following

Irina Yanina 16:43 2025-05-23 UTC+2

USD declares war on EUR

What's new is often just what's been forgotten. As spring draws to a close, the long-dismissed mantra "sell America" is making a comeback in markets. The phrase gained traction following

Marek Petkovich 14:59 2025-05-23 UTC+2

USD/JPY: what happens with yen?

The USD/JPY pair is experiencing heightened price turbulence. At the end of April, the pair sharply declined, hitting a 7-month low at 139.90. Then, last week, a northbound impulse pushed

Irina Manzenko 13:52 2025-05-23 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.