empty
07.05.2025 09:56 AM
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 of the White House intends to dictate the terms of negotiations. Either meet his demands or leave the American market. The S&P 500 has realized that the U.S. president can change his approach at any moment, and negotiations are taking place under the threat of force. What are the odds of success under such conditions? The decline of the broad stock index for a second consecutive trading session reflects significant doubt.

Goldman Sachs believes current valuations of U.S. equities leave little room for an extended S&P 500 rally. JP Morgan argues that U.S.-issued assets are not a safe haven amid market shocks. HSBC urges caution, citing dire fundamental conditions. Despite the longest winning streak since 2024, the broad stock index is still underperforming its European counterparts. However, the political crisis in Germany could shift the balance of power.

S&P 500 vs. European Stock Index Performance

This image is no longer relevant

Friedrich Merz became a star in the financial markets by proposing an adjustment to Germany's debt brake rule. But as the saying goes, there's a thin line between greatness and ridicule. He failed to gain Bundestag approval for the chancellorship despite having sufficient coalition support on paper. Et tu, Brute? Someone from within his own Christian Democratic Union betrayed him. So far, this hasn't rattled the DAX 40 much, but if new parliamentary elections are called, things could quickly spiral out of control.

Capital outflows from the U.S. to Europe, driven by the loss of American exceptionalism, have been one of the reasons behind the S&P 500's slide toward its April lows. Should capital reverse course and return to the U.S., the broad index could pleasantly surprise its supporters.

Still, a slowing global economy and looming U.S. recession are not ideal for buying stocks. Trump attempts to overhaul the international trade system, but such a transformation requires financing. According to the IMF, banks provide trade financing worth $10 trillion. Disruptions in supply chains could reduce lending volumes and tighten financial conditions. Can the U.S. and other countries withstand that? I doubt it.

This image is no longer relevant

The president's determination to dictate terms—negotiating with a proverbial gun to the other party's head—frightens the S&P 500 more than the potential political crisis in Germany or the upcoming U.S.-China trade talks set to begin in Switzerland. And let's not forget the Federal Reserve, which, despite Trump's pressure, plans to keep the federal funds rate unchanged at least until July. That's bad news for the stock market.

The S&P 500 is pulling back toward its moving averages on the daily chart. A bounce near the pivot level at 5510 may prompt traders to reassess short positions opened from 5695. Until then, holding those positions remains the advisable course.

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

GBP/USD Overview – June 13: The Court Won't Stop Donald Trump!

The GBP/USD currency pair continued its upward movement on Thursday and nearly updated its three-year high. For most of the day, quotes hovered around the 1.36 level

Paolo Greco 03:41 2025-06-13 UTC+2

EUR/USD Overview – June 13: America's Economy Gets Lucky

The EUR/USD currency pair continued its strong upward movement throughout Thursday. Is anyone still puzzled as to why the U.S. dollar keeps falling? From our point of view, the reasons

Paolo Greco 03:41 2025-06-13 UTC+2

Trump Sends Out "Letters of Happiness"

It has been less than two weeks since Donald Trump raised import tariffs on steel and aluminum for all countries except the UK. While negotiations with the UK were deemed

Chin Zhao 00:21 2025-06-13 UTC+2

GBP/USD. A Weak Pound Stronger Than a Weak Greenback

Following weak UK labor market data, equally soft figures on British economic growth were released on Thursday. Almost all components of the report came out in the "red zone," increasing

Irina Manzenko 00:20 2025-06-13 UTC+2

The Dollar Flees the Battlefield

The old becomes new again. The word "recession" again trended in the Forex and other financial markets. May's U.S. Consumer Price Index (CPI) fell short of Bloomberg analysts' forecasts. Following

Marek Petkovich 00:20 2025-06-13 UTC+2

Market sells facts

Markets rise on rumors and fall on facts. For a long time, the S&P 500 had been rising due to investors' confidence in a US-China trade agreement. Once the deal

Marek Petkovich 16:53 2025-06-12 UTC+2

The Fed Is Right—It's Too Early to Cut Rates (I Expect a Decline in #SPX and an Increase in Gold Prices)

The fresh U.S. Consumer Price Index (CPI) data released on Wednesday, although below the consensus forecast, confirmed the persistence of inflationary pressure. This fully justifies the Federal Reserve's reluctance

Pati Gani 10:37 2025-06-12 UTC+2

Trump Threatens Tariffs Again – Markets React

President Donald Trump announced yesterday that he intends to send letters to trade partners within the next one to two weeks outlining unilateral tariff rates. This is ahead

Jakub Novak 09:10 2025-06-12 UTC+2

What to Pay Attention to on June 12? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are set for Thursday, but only a few are truly important. The key reports to highlight are the GDP and industrial production data from

Paolo Greco 05:52 2025-06-12 UTC+2

GBP/USD Overview – June 12: Protests Against Trump and Fed Policy

The GBP/USD currency pair continued to trade very calmly on Wednesday. Naturally, when U.S. inflation data was released, we saw a brief burst of market reaction—though it didn't last long

Paolo Greco 04:07 2025-06-12 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.