empty
01.07.2025 09:53 AM
US stock market leaves worst behind

The S&P 500 is showing its best quarterly performance since 2023, while the Nasdaq 100 hasn't looked this strong since 2020. The US economy is as strong as a bull, inflation is slowing, and major banks, including JP Morgan and Goldman Sachs, are raising their forecasts for the US stock market. The market enjoys support from the White House and genuinely believes the worst is behind it. However, history suggests that euphoria often ends badly.

Quarterly performance of the S&P 500

This image is no longer relevant

While hedge funds have been increasing their net long positions in US equities for eight consecutive weeks, Bank of America is warning about rising risks of a speculative bubble in the US stock market. The concern is that investors are overly enthusiastic about buying equities amid expectations of a federal funds rate cut. Indeed, the probability of three Fed rate cuts in 2025 has risen over the past month from 29% to 49%.

Even if the first half of the year was great for the S&P 500, there's no guarantee the rest of the year will be just as rosy. So far, tariffs haven't shown up in inflation or corporate spending. According to Goldman Sachs, most American companies will pass import tariffs on to consumers, but profit margins will still take a hit. FactSet analysts expect earnings to grow 9.4% in 2024, though back in January, the forecast was 14.3%.

JP Morgan believes that negative factors like a significant deterioration in the US labor market will outweigh the positive effects of potential Fed rate cuts on the S&P 500. Historically, monetary easing during recessions and rising unemployment in the US has more often led to declines in the broader stock index than to gains.

S&P 500 vs. federal funds rate trends

This image is no longer relevant

The current market euphoria is also driven by investor belief that the peak of trade conflict escalation has passed. Tariff threats are being seen as part of Donald Trump's negotiation tactics. The President is expected to secure concessions from US trade partners — a potential boost for the economy. However, White House officials have indicated that the universal 10% tariff will only remain in place for countries that negotiate in good faith. For others, import duties will rise.

This image is no longer relevant

In my view, no asset can rise indefinitely. The risks of a correction in the S&P 500 increase with each passing day. The question is: what will be the trigger for a pullback in the broad stock index? The US nonfarm payrolls? Or the expiration of the White House's 90-day tariff delay?

Technically, on the daily S&P 500 chart, there has been a test of resistance at 6,200. If the bulls manage to hold above this level, traders may look to expand long positions initiated from 6,051. Otherwise, it may be wise to lock in profits, reverse positions, and go short.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Igor Kovalyov
Start trade
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

Trump Continues Seeking Ways to Pressure China Through Other Countries

According to media reports, President Donald Trump's ongoing efforts to pressure China via its supply chain trading partners threaten to undermine the country's growth and much of its exports

Jakub Novak 10:30 2025-07-22 UTC+2

The European Union Takes on China

While the euro is gradually recovering after a major sell-off observed for most of this month, recent data shows that the latest round of EU sanctions has targeted a number

Jakub Novak 10:24 2025-07-22 UTC+2

The Closer We Get to August 1, the More Tense Market Conditions Become (Potential Decline in #USDX and USD/JPY Pair)

As August 1 approaches—the date previously announced by Donald Trump for the imposition of tariffs against U.S. trading partners—market participants are becoming increasingly focused on this issue, exercising caution

Pati Gani 10:14 2025-07-22 UTC+2

Market braces for 'Zombie Liberation Day'

Despite the looming August 1 deadline, when the White House's sweeping import tariffs are set to take effect, the S&P 500 keeps hitting new record highs. Step by step

Marek Petkovich 09:10 2025-07-22 UTC+2

What to Pay Attention to on July 22? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic reports scheduled for Tuesday. Therefore, weak market movements can be expected throughout the day. Of course, Donald Trump may at any moment retake center stage with

Paolo Greco 07:20 2025-07-22 UTC+2

GBP/USD Overview – July 22: American-Style Business in All Its Glory

The GBP/USD currency pair also traded higher on Monday, despite the absence of any local drivers. Let us recall that no fundamental or macroeconomic event was scheduled on the first

Paolo Greco 03:45 2025-07-22 UTC+2

EUR/USD Overview – July 22: The Dollar Has No Prospects

The EUR/USD currency pair traded higher throughout Monday. The rise in quotes began early in the morning and persisted for most of the day. Despite the lack of fundamental

Paolo Greco 03:45 2025-07-22 UTC+2

Trump Raises the Stakes in the Fight with the EU

The new week had barely begun when the dollar faced fresh reasons for decline. Over the past two weeks, there have been plenty of such reasons, but the market persisted

Chin Zhao 00:43 2025-07-22 UTC+2

EUR/USD: Bloomberg Leaks and Lutnick's Statements. Trade Talks in Focus

Last week, the euro-dollar pair traded within the range of 1.1560–1.1650, repeatedly testing the boundaries of this corridor. On Friday, traders attempted to consolidate above the 1.1650 resistance level

Irina Manzenko 00:42 2025-07-22 UTC+2

The Dollar Raises the Stakes

Appetite comes with eating. Initially, Donald Trump wanted to impose a 10% universal tariff on Europe; now he has raised the stakes to 15%. Starting August 1, it will rise

Marek Petkovich 00:42 2025-07-22 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.