empty
31.03.2025 10:58 AM
US stock market runs into trouble

Rumors about mutual tariffs and another blow to consumer confidence triggered the second-worst sell-off of the S&P 500 this year. Investors are still holding piles of US stocks, but the threat of a recession due to the White House's tariff policy is forcing them to sell toxic assets. This could lead to a significant correction in the broad stock index.

Daily dynamics of the S&P 500

This image is no longer relevant

US stock markets entered 2025 with a high level of optimism. However, the first quarter turned out to be the worst for the S&P 500 compared to European equities since 2015. It's no joke to say that investors in Europe have already lost 13% from the fall in the broad stock index and the weakening of the US dollar against the euro!

They have only themselves to blame. By the end of 2024, the share of US stocks owned by non-residents reached 20%, compared to 7% at the start of the century. The proportion of US-issued equities in global stock indices surged from 47% in 2008 to 72%! The retribution for excessive enthusiasm about American exceptionalism was inevitable.

The share of US stocks in global stock indices

This image is no longer relevant

The reason for the love of US stocks was the anemic growth of stock indices abroad, the rapid expansion of the US economy, and corporate profit growth driven by artificial intelligence technologies. Even with the latest sell-off, the S&P 500 has jumped 170% over the last decade. In comparison, the UK's FTSE 100 has only gained 30%. The US simply had no competitors.

They appeared in 2025. First and foremost, this refers to Europe. For the first time in years, the rationale for purchasing stocks issued in the Old World is not only their cheapness in terms of P/E. Germany's fiscal stimulus raises hopes for an economic boost. Besides, the belief in the imminent end of the armed conflict in Ukraine could release the region from geopolitical risks.

However, the EuroStoxx 600 will fall along with the S&P 500 by the end of March due to fears about import tariffs. According to sources from the Wall Street Journal, Donald Trump's mood has shifted again. One moment, he announces less severe mutual tariffs than investors had expected. Shortly after, he returns to the idea of universal tariffs and speculates about what the rates should be. The latter type of tariffs risks collapsing international trade and the global economy much faster than the mutual ones. Should we be surprised by sell-offs in stock markets worldwide?

This image is no longer relevant

Another drop in US consumer expectations to their lowest level since 2022, along with a rise in expected inflation, paints a stagflationary scenario for the US economy.

Technically, on the daily chart of the S&P 500, the success of the "bear" attack increases the risks of a further downtrend, rather than the previously forecasted consolidation in the range of 5,500 to 5,790. It would be wise to hold short positions opened during the rise to the upper border and then added from 5,670.

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

Market gives away its secret

The world is a stage, and people are its actors. Tragicomedies happen every day in financial markets, but what happened at the start of the second week of April

Marek Petkovich 11:49 2025-04-08 UTC+2

Will Tomorrow Be Better Than Yesterday? (There is a risk of renewed decline in AUD/USD and gold prices)

It's easy to stay optimistic and hope that decision-makers act according to your wishes. Why does this occur? And why can it be a trap for investors? The market sell-off

Pati Gani 09:25 2025-04-08 UTC+2

What to Pay Attention to on April 8? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic events scheduled for Tuesday. However, the current market environment is hardly affected by the macroeconomic background. At this moment, the market has no use for standard

Paolo Greco 07:35 2025-04-08 UTC+2

GBP/USD Overview. April 8. Now It's the Pound Plunging into the Abyss

The GBP/USD currency pair continued its near-crash-like decline throughout Monday. Can anyone even explain, in hindsight, what's happening in the markets right now? There are no questions regarding the drop

Paolo Greco 06:07 2025-04-08 UTC+2

EUR/USD Overview. April 8. 2025 – The Year of Trade Wars

The EUR/USD currency pair traded with notable volatility on Monday. Particularly for a so-called "boring Monday," with no significant events scheduled. Yet yesterday was anything but boring—many experts have already

Paolo Greco 06:07 2025-04-08 UTC+2

The Pound Attempts to Hold Within the Bullish Channel

The United Kingdom is among the few G20 countries that got off relatively lightly—it was hit with a 25% tariff on car exports and a 10% tariff on other goods

Kuvat Raharjo 00:58 2025-04-08 UTC+2

The Euro Adopts a Coyote Tactic

If someone strikes your left cheek, there's no need to plead for mercy. Interestingly, more than 50 countries, according to the White House, have done just that. But not China

Marek Petkovich 00:56 2025-04-08 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is regaining ground after Friday's decline, trading just below the psychological level of 1.1000 amid mixed signals. The U.S. dollar is struggling to capitalize

Irina Yanina 18:55 2025-04-07 UTC+2

XAU/USD. Analysis and Forecast

At the moment, gold has halted its corrective decline from the all-time high reached last week. The recent plunge in global financial markets, triggered by the mutual tariffs initiated

Irina Yanina 18:52 2025-04-07 UTC+2

Jerome Powell Is Not Ready to Intervene

Investors were deeply disappointed when Federal Reserve Chair Jerome Powell made it clear during his Friday speech at the end of last week that he does not intend to intervene

Jakub Novak 11:11 2025-04-07 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.