empty
27.03.2025 09:13 AM
Market picks wrong favorite

The higher the climb, the harder the fall. The S&P 500 tumbled in response to Donald Trump's announcement of 25% tariffs on automobiles. There will be no exceptions, although countries included in the North American Free Trade Agreement will receive preferential treatment for auto parts exports to the US. Europe and Japan are threatening retaliation, and fear has returned to equity markets.

Some of the most heavily sold stocks were names from the Magnificent Seven, which are now set to face their worst quarter in two years. Competition from China in electric vehicles and artificial intelligence has put an end to American exceptionalism — and this is just the beginning.

Magnificent Seven Quarterly Dynamics

This image is no longer relevant

Although Donald Trump has labeled former allies as freeloaders — draining the US of jobs and wealth — the country's GDP growth has long been fueled by globalization. By undermining it with protectionist policies, the White House risks a slowdown in GDP growth as early as Q1, with the Atlanta Fed's leading indicator pointing to just 0.2% growth. That's bad news for the S&P 500.

The US may appear to hold the upper hand in the trade war, giving Trump room to toss around tariff threats. However, the country runs a large current account deficit, which requires continued inflows of foreign capital into Treasury markets. Will China, Japan, and Europe, now targeted by these import tariffs, continue to finance it? The EU's retaliation plan includes reducing its holdings of US debt — a painful payback for the trade conflict. What if Beijing and Tokyo follow suit?

The outsized share of US equities in global portfolios is also a product of international cooperation. Capital is already flowing out of US markets, but the outflow is far from over. It remains to be seen how much a coordinated response from global economies will ultimately cost the United States.

This image is no longer relevant

A narrowing US budget deficit could also spell trouble for the S&P 500. By mid-year, the debt ceiling will be back in the spotlight, and Trump's plans to cut $4.5 trillion in taxes, $2 trillion in spending, and $2.5 trillion in tariffs may prove difficult to implement. In any case, Washington is moving towards fiscal consolidation, which will further slow US GDP growth. In a high-inflation environment, the Fed is unlikely to come to the rescue.

From a technical point of view, the S&P 500 pulled back earlier than expected on the daily chart. The 5,815 level was not reached, but the key now is to identify the boundaries of a medium-term consolidation range — likely between 5,500 and 5,790. It may make sense to sell the index on rallies and look to buy back near the lower boundary of the trading range.

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

EU–US Trade Deal. Part 2

On Monday, I got the impression that very few people in Europe knew what concessions von der Leyen was about to make. The American side of the negotiation was likely

Chin Zhao 00:45 2025-07-29 UTC+2

EU–US Trade Deal. Part 1

Four days before August 1 — the final deadline for the negotiations — the European Union and the United States announced the signing of a trade agreement. This deal

Chin Zhao 00:45 2025-07-29 UTC+2

EUR/USD: Correction or Trend Reversal?

"A celebration with tears in our eyes" — that's perhaps the most accurate way to describe the European reaction to the trade agreement signed between the U.S

Irina Manzenko 00:45 2025-07-29 UTC+2

Will the Dollar Regain Its Former Glory?

Everything new is well-forgotten. At the end of 2024, bearish forecasts for EUR/USD were widespread. The argument was that White House tariffs would slow eurozone GDP while accelerating inflation

Marek Petkovich 00:45 2025-07-29 UTC+2

Bitcoin Sheds Excess Baggage

Trends give way to consolidations. Consolidations pave the way for new trends. That's the nature of the market. And Bitcoin is no exception. The inability of the bulls to resume

Marek Petkovich 00:45 2025-07-29 UTC+2

The EU–US Deal Is a Disaster for the European Economy

The euro quickly resumed its decline after a morning rally during Asian trading. Apparently, investors have come to realize that the trade deal between

Jakub Novak 19:10 2025-07-28 UTC+2

USD/JPY. Analysis and Forecast

The Japanese yen continues to lose ground against the strengthening U.S. dollar. News of a trade agreement between the U.S. and the European Union, reached on Sunday, along with

Irina Yanina 18:51 2025-07-28 UTC+2

NZD/USD. Analysis and Forecast

The New Zealand dollar remains under pressure for the third consecutive day, with the NZD/USD pair trading below the key 0.6000 level and attempting to hold near the 0.5975 support

Irina Yanina 12:15 2025-07-28 UTC+2

XAU/USD. Analysis and Forecast

Today, gold is attempting a recovery despite the broader strength of the U.S. dollar, which is undermining the global rebound in the precious metal. U.S. President Donald Trump and European

Irina Yanina 12:08 2025-07-28 UTC+2

Yen Continues to Weaken

The annual inflation rate in Tokyo declined from 3.1% in June to 2.9% in July. The core index, excluding food and energy prices, also slowed from 3.1% to 2.9% year-over-year

Kuvat Raharjo 09:56 2025-07-28 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.