A global stock market crash under pressure from the trade war
Since its all-time high last February, the S&P 500 has lost 20%, dragging all global equity markets into a general sell-off. This downward movement concerns not only the United States, but also the MSCI World index, confirming that a global aversion to risk has taken place. And unlike other periods of tension, this time there were no safe havens, except perhaps gold and certain bond segments. All sectors, even defensive ones, were affected.
The source of this intense pressure on the markets? The trade war waged by the Trump administration against over 70 countries, with China leading the retaliatory tariffs. This highly conflicted geopolitical context has rekindled fears of a global economic slowdown, hence the massive flight to liquidity.
The market is hoping for a PIVOT: but which one?
Faced with this situation, only one thing can reverse the trend: a PIVOT. In other words, a major policy change capable of reversing the current dynamics of the financial markets.
Two types of pivot are possible in the spring of 2025: that of the Federal Reserve (the FED) or that of the Trump administration.
The FED's pivot is a monetary reversal. This would involve the central bank lowering interest rates again and halting the reduction of its balance sheet - in other words, injecting more liquidity into the system. In fact, the FED already slowed the reduction of its balance sheet in April, a sign that it may be getting ready to move. Two key dates to watch: May 7 and June 18, the next monetary policy decisions.
But this pivot will depend on two essential conditions: the evolution of inflation and the unemployment rate. If these two variables warrant emergency support, the Fed could initiate the resumption of the federal funds rate cut.
Trump's pivot: tax and trade diplomacy
The other scenario is the Trump pivot. It rests on two pillars: trade diplomacy and fiscal policy. On the trade side, it would involve a return to the negotiating table, with the signing of agreements that would put an end to the spiral of customs sanctions. On the tax side, Trump continues to deploy a very marked pro-business strategy.
Already, his first term (2017-2021) had been marked by a massive reduction in corporate taxes (from 35% to 21%) and tax cuts for households via the Tax Cuts and Jobs Act. For this second term, starting in January 2025, Trump proposes to go even further with his “One Big Beautiful Bill” project: perpetuate the 2017 cuts, abolish taxes on tips, overtime, even pensions.
Above all, Trump is considering a 15% corporate tax cut, especially for industries that produce in the United States. This would be a major fiscal shock, which could boost growth expectations and thus... the equity markets.
Spring 2025 is a critical time window. The market can no longer afford to navigate uncertainty without a strong signal. Either the Fed will change its tone, or Trump will bend his economic and trade line. A pivot is essential if the S&P 500 is to validate a major market low.
In terms of technical analysis of the financial markets, the S&P 500 index thus corrected by 20% before recovering last week close to the major technical support of 4800 points.
This major chartist support (see the chart of the S&P 500 future contract attached to this analysis) corresponds to the peak of the equity market at the end of 2021 and the starting point of the bear market in 2022, against the backdrop at the time of the Central Banks' commitment to fighting inflation.
This 4800-point level represents the guarantee of the uptrend initiated at the end of 2022. Note that this horizontal support is underpinned by a graphic uptrend line that joins all major market lows since the stock market shock of the health crisis.
Another factor reinforcing the strength of this support is the quantitative aspect, which describes an extreme oversold technical situation conducive to a low point. The percentage of S&P 500 shares above the 50-day moving average has fallen below 10%, a threshold that has seen market stabilizations for over 15 years.
The S&P 500 chart and the quantitative chart are attached to this analysis.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
Since its all-time high last February, the S&P 500 has lost 20%, dragging all global equity markets into a general sell-off. This downward movement concerns not only the United States, but also the MSCI World index, confirming that a global aversion to risk has taken place. And unlike other periods of tension, this time there were no safe havens, except perhaps gold and certain bond segments. All sectors, even defensive ones, were affected.
The source of this intense pressure on the markets? The trade war waged by the Trump administration against over 70 countries, with China leading the retaliatory tariffs. This highly conflicted geopolitical context has rekindled fears of a global economic slowdown, hence the massive flight to liquidity.
The market is hoping for a PIVOT: but which one?
Faced with this situation, only one thing can reverse the trend: a PIVOT. In other words, a major policy change capable of reversing the current dynamics of the financial markets.
Two types of pivot are possible in the spring of 2025: that of the Federal Reserve (the FED) or that of the Trump administration.
The FED's pivot is a monetary reversal. This would involve the central bank lowering interest rates again and halting the reduction of its balance sheet - in other words, injecting more liquidity into the system. In fact, the FED already slowed the reduction of its balance sheet in April, a sign that it may be getting ready to move. Two key dates to watch: May 7 and June 18, the next monetary policy decisions.
But this pivot will depend on two essential conditions: the evolution of inflation and the unemployment rate. If these two variables warrant emergency support, the Fed could initiate the resumption of the federal funds rate cut.
Trump's pivot: tax and trade diplomacy
The other scenario is the Trump pivot. It rests on two pillars: trade diplomacy and fiscal policy. On the trade side, it would involve a return to the negotiating table, with the signing of agreements that would put an end to the spiral of customs sanctions. On the tax side, Trump continues to deploy a very marked pro-business strategy.
Already, his first term (2017-2021) had been marked by a massive reduction in corporate taxes (from 35% to 21%) and tax cuts for households via the Tax Cuts and Jobs Act. For this second term, starting in January 2025, Trump proposes to go even further with his “One Big Beautiful Bill” project: perpetuate the 2017 cuts, abolish taxes on tips, overtime, even pensions.
Above all, Trump is considering a 15% corporate tax cut, especially for industries that produce in the United States. This would be a major fiscal shock, which could boost growth expectations and thus... the equity markets.
Spring 2025 is a critical time window. The market can no longer afford to navigate uncertainty without a strong signal. Either the Fed will change its tone, or Trump will bend his economic and trade line. A pivot is essential if the S&P 500 is to validate a major market low.
In terms of technical analysis of the financial markets, the S&P 500 index thus corrected by 20% before recovering last week close to the major technical support of 4800 points.
This major chartist support (see the chart of the S&P 500 future contract attached to this analysis) corresponds to the peak of the equity market at the end of 2021 and the starting point of the bear market in 2022, against the backdrop at the time of the Central Banks' commitment to fighting inflation.
This 4800-point level represents the guarantee of the uptrend initiated at the end of 2022. Note that this horizontal support is underpinned by a graphic uptrend line that joins all major market lows since the stock market shock of the health crisis.
Another factor reinforcing the strength of this support is the quantitative aspect, which describes an extreme oversold technical situation conducive to a low point. The percentage of S&P 500 shares above the 50-day moving average has fallen below 10%, a threshold that has seen market stabilizations for over 15 years.
The S&P 500 chart and the quantitative chart are attached to this analysis.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.