Geopolitical and Trade Tensions Reignite Pressure on Wall StreetAfter a brief and limited reprieve observed in the previous session, negative pressures have returned to the U.S. stock market, renewing investor caution. During the current session, the Nasdaq 100 is down 0.6%, while the S&P 500 loses 0.4%, demonstrating the underlying fragility of the market despite recent positive signals on the inflation front.
Although both consumer and producer inflation moderated in February, generating optimistic expectations about potential relief in the Federal Reserve's rhetoric, investors remain skeptical amid persistent geopolitical and trade uncertainty. The recent U.S. protectionist measures, including 25% tariffs on steel and aluminum, have once again heightened global economic risks, exacerbating tensions particularly with key partners such as Canada, China, and the European Union, who have responded with a more confrontational stance, unlike Mexico, which has been more cautious in addressing these new episodes of trade wars.
The market's sensitivity to these risks was evident with the new U.S. threat to impose a 200% tariff on alcoholic beverages from the EU, suggesting that volatility will continue to dominate in the coming sessions.
This complex scenario is expected to be carefully evaluated at next week's FOMC meeting, where the Fed is expected to keep rates unchanged. However, recent inflation data could encourage a more dovish tone regarding future rate cuts. Markets are currently pricing in three rate cuts this year, a divergent expectation from the central bank's stance in December, when it signaled only one. The March meeting will be crucial in assessing whether the Fed aligns more closely with market expectations or maintains a more cautious stance.
Amid these circumstances, the sectors most exposed to uncertainty, such as discretionary consumption and technology, continue to be the most affected. In contrast, the materials sector is showing relatively strong performance.
Looking ahead, focus will remain on how trade and geopolitical tensions evolve, key factors that will determine whether U.S. markets can finally find a turning point to sustainably resume their upward trajectory.
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