empty
02.05.2025 09:24 AM
The Market Enters Turbulent Waters

The market is confident that tariffs won't materialize or that companies can pass them on to customers. The S&P 500's eight-day rally—its longest since August—strongly hints at this. So does the deeper decline in the price-to-earnings ratio compared to the price-to-sales ratio. Issuers have delivered strong financial results and intend to continue doing so despite import tariffs. But isn't there a bit too much optimism in the market?

Dynamics of Price-to-Earnings and Price-to-Sales Ratios

This image is no longer relevant

Strong corporate earnings from giants like Microsoft and Meta Platforms fueled the S&P 500 rally. Moreover, China has finally expressed readiness to negotiate with the U.S. However, let's not be misled. Beijing plans to fight and sees dialogue as possible only on one condition: if Washington lifts the draconian 145% tariffs it imposed. The U.S. has no intention of doing so—access to the "big beautiful store," as Donald Trump calls the American market, comes at a price.

Equity investors seem to have forgotten about the risk of recession despite recent macroeconomic data pointing to a looming downturn in the U.S. economy. This includes the labor market, where job openings, ADP private employment, and jobless claims data have disappointed and raised red flags—as has business activity. Its decline in the manufacturing sector is especially alarming. During past recessions, the PMI fell to 40 and below.

U.S. Business Activity Trends

This image is no longer relevant

S&P 500 bulls have another reason to worry: seasonality. The century-old tradition of "sell in May and go away" is again in play. According to Bespoke Investment Group, from 1993, the S&P 500 returned 171% from May to October versus 731% from November to April.

The stock market is entering turbulent waters. There is no clear sign of de-escalation in the U.S.-China trade conflict, a cooling U.S. economy is becoming more evident, and tensions between the White House and the Federal Reserve could flare up at any moment. Following Donald Trump, even the Treasury Secretary is now giving advice to Jerome Powell. Scott Bessent has called the Fed's attention to the bond market, which is signaling the need for at least three rate cuts in 2025.

This image is no longer relevant

The S&P 500 has long ignored macroeconomic data, preferring to listen to White House officials—but that can't last forever. Weak April nonfarm payrolls data could trigger a wave of selling in the U.S. stock market.

On the daily chart of the broad stock index, the resistance level at 5625 held up well. Those holding longs from 5400 could take profits or hedge their positions. Increasing short positions makes sense if the S&P 500 falls below 5515 and 5435.

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

Is the War Over or Not?

On Tuesday morning, Donald Trump announced the end of the war between Iran and Israel. Notably, he made no mention of the U.S. in this conflict or ceasefire despite having

Chin Zhao 00:42 2025-06-25 UTC+2

AUD/USD: The Aussie Is Back in the Game

The Australian dollar has returned to the 0.65 range against the U.S. dollar amid easing geopolitical tensions and renewed interest in risk assets. The declared ceasefire in the Middle East

Irina Manzenko 00:22 2025-06-25 UTC+2

The Dollar Attacks the Fed

Donald Trump has a remarkable ability to draw market attention. One moment, the U.S. President imposes massive tariffs on Independence Day; the next, he announces a 90-day delay. He reports

Marek Petkovich 00:22 2025-06-25 UTC+2

USD/CHF. Analysis and Forecast

Today, the USD/CHF pair continues to remain under pressure for the second day in a row, having dropped to the key psychological level of 0.8100 and updated its weekly

Irina Yanina 18:25 2025-06-24 UTC+2

The Whole World is a Stage, and Countries Are Its Actors... (A Limited Decline in Gold and a Rise in Bitcoin Are Possible)

Iran responded to the U.S. with a strike on an American military base in Qatar, thereby demonstrating its resolve for retaliation and confrontation. Markets reacted in a rather peculiar

Pati Gani 09:25 2025-06-24 UTC+2

The Market Has Moved On From the War

Does Iran want war? Judging by the symbolic attack on American bases in Qatar, Tehran does not appear eager to enter into an armed conflict with Washington — which

Marek Petkovich 07:19 2025-06-24 UTC+2

What to Pay Attention to on June 24? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Tuesday, and none are of significant importance. Essentially, the only one worth mentioning is the German Business Climate Index —

Paolo Greco 07:19 2025-06-24 UTC+2

GBP/USD Overview – June 24: No Confirmation of Destruction

The GBP/USD currency pair also traded relatively calmly on Monday. While there were some price "swings," many traders and analysts had expected a much more significant move. The dollar strengthened

Paolo Greco 03:45 2025-06-24 UTC+2

EUR/USD Overview – June 24: Iran Exits Talks and Launches a Retaliatory Strike

The EUR/USD currency pair traded extremely calmly on Monday, considering the intense fundamental backdrop that developed over the weekend. Recall that over the weekend, Donald Trump once again "changed

Paolo Greco 03:45 2025-06-24 UTC+2

Trump Keeps Hitting a Wall

There's a saying: "An irresistible force meets an immovable object." It describes an irreconcilable standoff where neither side is willing to compromise. In my view, Trump's "scythe," with which

Chin Zhao 00:12 2025-06-24 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.