empty
28.03.2025 09:19 AM
Markets Have Found the Culprits

If you don't get it the first time, you will the second. The S&P 500 sell-off, led by U.S. and foreign automaker shares, continued a second day after the imposition of 25% tariffs. Donald Trump threatened the European Union and Canada with retaliation should they respond jointly to the import duties, and companies have begun tallying up losses. The broad stock index is confidently moving toward the lower boundary of its medium-term trading range of 5500–5790, but blaming only the White House occupant for all its troubles would be misguided.

The sell-off of overvalued "Magnificent Seven" companies, slowing corporate profit growth, and a weakening U.S. economy contribute to a capital shift from North America to Europe. European indices are currently outperforming the S&P 500 by a wide margin. However, according to the world's largest asset manager, this advantage may not last long. BlackRock believes that Germany's fiscal stimulus will primarily benefit banks and defense companies — a very narrow group. Therefore, one shouldn't count on the EuroStoxx 50 and DAX 40 rally to continue at the same pace.

Performance of European vs. U.S. Stock Indices

This image is no longer relevant

By contrast, the U.S. stock market will likely receive a fresh boost once the situation surrounding Donald Trump's protectionist policies becomes clearer. Many companies will adapt to the tariffs, enabling the S&P 500 to grow again.

But first, the broad stock index would do well to shed some dead weight. In 2025, that weight comes from the "Magnificent Seven" stocks. Back in February, they were trading at 45 times forward earnings. Only the sell-off has brought the P/E ratio down to 35 — still high, though the 11% drop in that figure is striking.

Q1 earnings season kicks off in a few weeks, and Wall Street's 7.1% earnings forecast is impressive. But that's four percentage points lower than what experts were projecting at the end of 2024. The discrepancy in estimates is above the historical average. Forecasts have been cut across all 11 S&P 500 sectors, and earnings growth is expected to slow in nine.

Earnings Forecast Trends by S&P 500 Sectors

This image is no longer relevant

This image is no longer relevant

The stronger-than-expected Q4 GDP reading of 2.4% shouldn't be misleading. For January–March, Bloomberg analysts expect GDP growth to slow to 1–1.5%, and the Atlanta Fed's leading indicator signals an even weaker pace — just 0.2%. Inflation remains elevated, tying the Fed's hands and preventing the central bank from throwing markets a lifeline.

Technically, on the daily chart, the S&P 500 continues its previously forecasted move from the upper boundary of its consolidation range (5500–5790) toward the lower bound. It makes sense to hold and even build on short positions once support at 5670 is broken — especially since the Broadening Wedge pattern is playing out clearly.

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

U.S. Inflation Data: What to Know and What to Expect

A highly anticipated March inflation report from the U.S. is expected today, with analysts predicting a slowdown, partly due to declining energy prices—which has brought some relief to consumers. According

Jakub Novak 12:09 2025-04-10 UTC+2

China Plans Emergency Meeting and a Strong Response to the U.S.

According to media reports, China's top leadership is set to hold an emergency meeting today to discuss additional economic stimulus measures following President Donald Trump's announcement of new tariff hikes

Jakub Novak 12:07 2025-04-10 UTC+2

Trump Suspends Tariffs for 90 Days but Raises Rates on China Even Further

President Donald Trump announced yesterday a 90-day suspension of tariff increases that had affected dozens of trade partners, while simultaneously raising tariffs on China to 125%. The president's policy shift

Jakub Novak 11:57 2025-04-10 UTC+2

Wall Street responding to president's call

Where there's smoke, there's fire. At the start of the second week of April, a rumor spread on social media about a 90-day delay in US tariffs, causing markets

Marek Petkovich 10:58 2025-04-10 UTC+2

Trump Maneuvers in Trade War With China (Potential for Continued Recovery in #SPX and AUD/USD)

The U.S. President continues maneuvering actively, engaging in geopolitics, economics, and global financial markets. Investors are asking: What happened on Wednesday? Why did the White House suddenly announce a truce

Pati Gani 09:56 2025-04-10 UTC+2

What to Pay Attention to on April 10? A Breakdown of Fundamental Events for Beginners

There are very few macroeconomic events scheduled for Thursday, but the U.S. inflation report still holds some relevance for traders. At the moment, inflation has limited influence because virtually everyone

Paolo Greco 06:49 2025-04-10 UTC+2

GBP/USD Overview. April 10: Trump Meets His Match

The GBP/USD currency pair showed gains and losses throughout Wednesday. The afternoon decline once again raised some questions, though market movements in recent months have lacked much logic. The market

Paolo Greco 03:21 2025-04-10 UTC+2

EUR/USD Overview. April 10: From Prince to Pauper

The EUR/USD currency pair continued to trade higher on Wednesday, once again failing to settle below the moving average line. Donald Trump keeps announcing new tariffs — or previously announced

Paolo Greco 03:21 2025-04-10 UTC+2

The Dollar – A Toxic Currency

Trouble often comes in pairs or groups. The decline of American exceptionalism is only one of the challenges facing EUR/USD bears. The main currency pair remains resilient and occasionally goes

Marek Petkovich 00:59 2025-04-10 UTC+2

GBP/JPY: Down, Only Down

The pound is plummeting against the yen. The cross has dropped by over a thousand points in just one week, reflecting the British currency's weakness and the yen's "crisis resilience."

Irina Manzenko 00:59 2025-04-10 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.