empty
17.06.2025 11:07 AM
Market may be falling into same trap again

History is repeating itself. Ahead of America's Independence Day, many market participants were saying that Donald Trump's bark was worse than his bite — suggesting the US president issued many threats but took little actual action. Reality proved otherwise: back then, the S&P 500 suffered a significant decline due to large-scale tariffs. Now, the index risks falling into the same trap again. Investors seem to believe that geopolitical risks are all bark and no bite.

Rumors of Iran's willingness to resume negotiations over its nuclear program were enough for retail investors to step in and buy the dip in the S&P 500. According to JP Morgan, retail investors purchased $23 billion worth of US equities in May alone. In early June, some players began taking profits, resulting in net sales of $400 million. However, any fresh attempts by the broad index to resume its uptrend are likely to attract new bulls.

The fading enthusiasm may also be due to the typical summer lull in the stock market. Derivatives suggest that the S&P 500 is likely to trade within a daily range of less than 1% for most of July. Key catalysts that could trigger more significant moves include upcoming US labor market reports and the Federal Reserve's policy meeting.

Projected fluctuations in S&P 500

This image is no longer relevant

In reality, Iran's interest in negotiations does not guarantee the end of the armed conflict. Tehran hopes to avoid direct US involvement on Israel's side. It knows that Jerusalem is not equipped for a prolonged campaign and is stalling for time. According to RBC Capital Markets, the S&P 500 could drop by as much as 20% if the Middle East conflict spreads to other countries and drags on. Such a scenario would be a clear negative for US stocks, hurting consumer sentiment, the broader US economy, and potentially prompting a hawkish shift from the Federal Reserve.

Indeed, Iran remains one of the world's largest oil producers. Bombings targeting oil infrastructure push Brent and WTI prices higher. Moreover, Tehran has the capability to block the Strait of Hormuz — a vital artery for Middle East oil exports to Europe. This could drive gasoline prices sharply higher in the US, making it difficult for the Fed to resume its easing cycle before year-end. Higher interest rates would clearly weigh on US equities.

Risks are also building on the trade front. The US has failed to nail down trade deals with Canada, Japan, and several other nations. As the 90-day grace period expires in early July, the likelihood of renewed trade wars grows.

This image is no longer relevant

Technical outlook for S&P 500

Technically, bulls on the S&P 500 are attempting to reclaim the key pivot level at 6,060 on the daily chart. As long as the broad index remains below this level — or if bullish attempts to break through it fail again — selling on rallies remains a valid strategy.

Marek Petkovich,
Analytical expert of InstaTrade
© 2007-2025

Recommended Stories

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is attempting to attract buyers. Despite the European Central Bank's decision on Thursday to leave interest rates unchanged, the euro is facing headwinds due to ongoing

Irina Yanina 13:20 2025-07-25 UTC+2

No Unity of Opinion Within the ECB Yet

Yesterday, the European Central Bank kept interest rates unchanged, citing risks stemming from the trade war with the U.S., the strong euro, and rising government spending. According to Governing Council

Jakub Novak 11:59 2025-07-25 UTC+2

ECB Leaves Rates Unchanged

Yesterday, many were watching how the European Central Bank would act under current conditions, as the economy still requires stimulus, but inflationary risks prevent further easing. Following the meeting, President

Jakub Novak 11:36 2025-07-25 UTC+2

The Market Has Chosen a Win-Win Strategy

The U.S. stock market has shaken off its fears completely. The VIX volatility index has plunged to its lowest level since early February, while the S&P

Marek Petkovich 11:15 2025-07-25 UTC+2

Will Trump Succeed in Forcing Powell to Do His Bidding? (Potential for a Bitcoin Decline and a Rise in #NDX)

The U.S. president is fully implementing his aggressive policy toward everyone and everything — both in foreign and domestic affairs. While his actions toward trade partners are more or less

Pati Gani 09:57 2025-07-25 UTC+2

What to Pay Attention to on July 25? A Breakdown of Fundamental Events for Beginners

There are relatively few macroeconomic reports scheduled for Friday, but all of them are quite important. In Germany, the IFO Business Climate Index will be released — the least significant

Paolo Greco 06:43 2025-07-25 UTC+2

GBP/USD Overview – July 25: No Sign of De-escalation Yet

On Thursday, the GBP/USD currency pair pulled back slightly, but this strengthening of the dollar has no real impact on the overall picture. The British pound has corrected in recent

Paolo Greco 04:17 2025-07-25 UTC+2

EUR/USD Overview – July 25: The ECB Meeting Did Not Change the Balance of Power Between the Dollar and the Euro

The EUR/USD currency pair continued to move upward on Thursday. There were several macroeconomic events scheduled for the day, and they did provoke a small market reaction

Paolo Greco 04:17 2025-07-25 UTC+2

EUR/USD: ECB's "Hawkish Pause" and Conflicting Macroeconomic Reports

The results of the ECB July meeting provided slight support for the euro. However, contradictory macroeconomic reports and anticipation of the outcome of the US-EU negotiations played a restraining role

Irina Manzenko 00:50 2025-07-25 UTC+2

The Euro Outsmarted the "Bears"

There was no "sell the fact" reaction. One of the reasons behind the recent EUR/USD rally was the expectation that the deposit rate would be held at 2% following

Marek Petkovich 00:50 2025-07-25 UTC+2
Can't speak right now?
Ask your question in the chat.
 

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 InstaTrade anyway.

We are sorry for any inconvenience caused by this message.