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

Could the Fed Deliver a Surprise Following Its Meeting? (Possible Renewed Decline in Oil Prices and GBP/USD Pair)

The turbulence of recent months, driven by Donald Trump's actions and the release of fresh U.S. economic data, has done little to help investors understand the true direction of asset

Pati Gani 09:50 2025-05-05 UTC+2

The Market Doesn't Dare to Go Against the Crowd

"Dance while the music plays." The S&P 500 has just completed a 9-day rally—the longest since 2024—driven by a strong U.S. labor market report and upbeat earnings from tech giants

Marek Petkovich 08:49 2025-05-05 UTC+2

GBP/USD Overview – May 5: Bank of England and Fed Meetings

The GBP/USD currency pair failed to show any decisive movement on Friday—it neither rose nor fell significantly. Many analysts interpreted the U.S. labor market and unemployment data as positive simply

Paolo Greco 06:44 2025-05-05 UTC+2

EUR/USD Overview – May 5: A New Week of Ordeals for the Dollar

The EUR/USD currency pair remained flat on Friday. The day saw both upward and downward movements. It is a notable achievement for the dollar that it has appreciated over

Paolo Greco 06:44 2025-05-05 UTC+2

EUR/USD: Weekly Preview. The May FOMC Meeting and (Possible) U.S.-China Trade Talks

The new week promises to be informative for EUR/USD traders. Most notably, the next Federal Reserve meeting, scheduled for May 6–7, will determine the central bank's future course of action

Irina Manzenko 05:53 2025-05-05 UTC+2

What to Pay Attention to on May 5? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic events are scheduled for Monday. The only noteworthy release is the ISM Services PMI from the U.S., but serious doubts exist about whether the market will

Paolo Greco 04:15 2025-05-05 UTC+2

The U.S. Dollar: Weekly Preview

The hit parade of American news and events will continue. I still believe that the most significant factor in the market is Donald Trump's decisions. It's enough to compare

Chin Zhao 00:51 2025-05-05 UTC+2

British Pound: Weekly Preview

Recent reviews for both instruments have become predictable and even somewhat dull. The entire set of factors capable of influencing market sentiment and instrument movement boils down to the President

Chin Zhao 00:51 2025-05-05 UTC+2

The Euro: Weekly Preview

For several weeks, the euro has remained in a sideways range. It seems like every analyst has already pointed this out and noted that without news from Trump, there's

Chin Zhao 00:51 2025-05-05 UTC+2

EUR/USD: Analysis and Forecast

The EUR/USD pair is attracting buyers today, breaking a three-day losing streak and attempting to build intraday momentum above the psychological 1.1300 level. This indicates a renewed interest from buyers

Irina Yanina 11:59 2025-05-02 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.