empty
24.02.2025 03:19 PM
US stock market takes nosedive

The animal spirits that propelled the S&P 500 up by 50% over the past two years are now taking on a global character. The capital shift from North America to Europe and Asia appears to be just beginning. The loss of the US stock market's exclusivity and signs of weakening consumer demand triggered the worst one-day decline in US equities since mid-December.

Global stock market trends

This image is no longer relevant

For a long time, the S&P 500 served as a safe haven for capital. The US economy demonstrated remarkable resilience against the Federal Reserve's aggressive monetary tightening, while the AI-driven boom made investing in the Magnificent Seven a no-brainer. Fears surrounding Donald Trump's tariff threats further boosted demand for US-issued securities.

However, as it became increasingly clear, the White House's tariff threats were merely part of negotiation tactics. So, as US high-tech giants faced growing competition from overseas, the market flipped upside down. Money began flowing out of North America at roughly the same pace it had rushed in during 2023–2024.

At the same time, the declining US dollar made foreign assets more attractive. Chinese stocks, for example, with a P/E ratio of 15, appear significantly cheaper than their US counterparts, which are trading at a P/E of 22.

Asian stocks and the US dollar

This image is no longer relevant

The rush to exit US markets is also fueled by signs of impending stagflation. Consumer confidence (University of Michigan) has plunged. Business activity in the services sector has contracted for the first time in two years. Inflation expectations have surged to their highest level since 1995. These signals point to an economy losing momentum while inflation risks accelerate. Chicago Fed President Austan Goolsbee attempted to calm the markets, stating that one report won't dictate policy decisions. However, investors chose to hit the sell button instead.

The market sentiment has shifted

Previously, bad news for the US economy was good news for the S&P 500, as it fueled expectations of a more dovish Federal Reserve. Now, bad news only fuels corrections.

Likewise, earlier speculation about lower-than-expected Trump tariffs supported the broad stock index, while now, such reports boost its foreign competitors. The Magnificent Seven are no longer market leaders—investors are actively seeking alternatives.

This image is no longer relevant

Strategic outlook

These shifts create an opportunity to implement paired trading strategies, simultaneously shorting the S&P 500 and buying its counterparts in Germany, Europe, or China—at least until mid-March, when the market starts pricing in the April 2 reciprocal tariff measures.

From a technical viewpoint, the daily chart of the S&P 500 is forming a broadening wedge reversal pattern. Shorts from 6,083 should be maintained and periodically increased.

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

What Will Powell Say?

Starting June 24, Fed Chair Jerome Powell will address Congress over two days, delivering the semiannual monetary policy report. On Tuesday, he will speak before the Senate Banking Committee

Irina Manzenko 00:12 2025-06-24 UTC+2

The Euro Gets a Knife in the Back

Trouble never comes alone. European industry is beginning to lose steam after rapid growth driven by a front-loaded surge in U.S. imports. The euro area is a net oil importer

Marek Petkovich 00:11 2025-06-24 UTC+2

XAU/USD. Analysis and Forecast

Today, gold is attracting new sellers. Amid a sharp escalation in the conflict between Iran and Israel, the United States conducted airstrikes on three Iranian nuclear facilities in Fordow, Natanz

Irina Yanina 17:59 2025-06-23 UTC+2

USD/JPY. Analysis and Forecast. The Japanese Yen Maintains an Intraday Bearish Outlook

Today, Monday, selling pressure on the Japanese yen dominates, driven by several factors. Traders continue to push back expectations of a potential rate hike by the Bank of Japan, assuming

Irina Yanina 17:56 2025-06-23 UTC+2

USD/CHF. Analysis and Forecast

At the moment, the U.S. Dollar Index (DXY) has reached a new two-week high, driven by hawkish signals from the Federal Reserve. The U.S. central bank has maintained its forecast

Irina Yanina 17:51 2025-06-23 UTC+2

Bitcoin longing for new highs, but something stymies

Bitcoin was created as a way to preserve value in times of turmoil, especially against the backdrop of weakening fiat currencies. It was believed that the arrival of institutional investors

Marek Petkovich 12:23 2025-06-23 UTC+2

Market fears retaliation

Hope for the best, prepare for the worst. Since the onset of the Israel-Iran conflict, the market seems to have largely ignored the severity of the situation. Investor reaction

Marek Petkovich 10:36 2025-06-23 UTC+2

The U.S. Joins the Iran-Israel War. What's Next for the Markets? (Limited downside potential for #NDX and #SPX contracts possible)

The United States could not abandon its satellite and Middle Eastern proxy—Israel—to face Iran alone. On Sunday, it struck Iran's nuclear facilities, though these strikes failed to achieve their objectives

Pati Gani 09:51 2025-06-23 UTC+2

What to Pay Attention to on June 23? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are set for Monday, though they share a similar nature. Business activity indices for June's services and manufacturing sectors will be released in Germany

Paolo Greco 06:51 2025-06-23 UTC+2

GBP/USD Overview – June 23: Geopolitics vs. Economy

The GBP/USD currency pair traded sluggishly throughout Friday, but one technical factor is worth noting: the price failed to consolidate above the moving average. Thus, technical analysis currently suggests

Paolo Greco 03:50 2025-06-23 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.