S&P 500 Index
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- Metadoro first
U.S. President Donald Trump was fair to market crowds, when he generously left a brief note on his Truth Social platform, which sounded like a perfect and timely trading signal. Early in the morning on Wednesday, April 9, Trump's message read: "THIS IS A GREAT TIME TO BUY!!! BE COOL! Everything is going to work out well”. His usual charm routine "The USA will be bigger and better than ever before!” as an enhancement slightly confused investing minds, as he actually combined the rather abstract conclusion on economic bargains for America with a much more concrete asset purchases' agenda. However, Trump's undisguised call to buy and a well-known biblical saying, "according to your faith so shall it be", have made all the rally believers rewarded sooner than most of them expected.
Several hours later, it became very clear to everyone from Trump's more official announcement, why this was supposed to become such a great moment to buy U.S. stocks. The Dow Jones Industrial Average rose nearly 3,000 points, or 7.87% in one trading session, while the S&P 500 broad barometer of Wall Street added 9.5%, and the tech-heavy NASDAQ Composite soared 12.2% before the closing bell of the day. Needless to say that the bullish rally in equities resumed in such a powerful way to follow a 90-days pause for the so-called reciprocal tariffs between the U.S and more than 75 countries, previously considered as a mortal threat to international trade. The pause gesture included 46% for Vietnam, 20% for the EU, 24% for Japan, 32% for Taiwan etc. Before this day, both Donald Trump himself and some members of his team just commented that tariffs can be permanent, but it could still be negotiated as an option at some point. And now it has finally become evident even to market sceptics that the frightening sizes of some tariffs originally represented a starting position in order to make all others horse-trade for mutually suitable conditions.
Trump himself, and U.S .Treasury Secretary Scott Bessent later, confirmed tariff pausing is needed as a relief to give enough time to negotiate thoroughly in case of each country. These formulations essentially ended the panicky negative effects of the trade war, making it clear once and for all that the whole tariff project was designed as a tool of negotiation, to make horse-trade and not a plain or self-sufficient tariff war. Trump's decision has slapped 125% tariffs on China alone, citing "the lack of respect that China has shown to the World’s Markets", a direct consequence of China's latest move to impose as much as 84% tariffs on US goods, up from the 34% previously announced.
if tariffs are low enough for all others, say, due to future agreements on changing the structure of trade turnover, but they are prohibitive for China, then such a situation will not last long, so that benefits for the entire world and a special severe law for China will also lead to nothing other than mutual concessions between Washington and Beijing in the end. The fact that China rejected this path from the very beginning did not go unnoticed by Trump, while no one else played hardball to receive proper treats already. The world has not united around China in an attempt of tough and rather futile resistance, but is calling Washington offices, looking for soft solutions. Trump is certainly not going to kill world economy. He is simply negotiating according to his own classic book on how to do it in order to achieve the result he needs. After shocking effects and panic, when the peak of a psychological influence is reached and tough arguments worked enough, he emphasizes the need for flexibility in decisions, mentioning that sometimes you have to “go under, over, or around a wall” to achieve the result.
And now we have the U-turn reversal pattern on all the three major U.S. indexes, as well as all major big techs. The stock rebound is more than convincing, because the reasoning behind it is strong. The bounce is still smaller, and the further share price dynamics is still under question only for Apple, which is more dependent than other flagship U.S. businesses on production chains in China and cannot assemble too expensive iPhones in America. For every other tech giant, the future will not be totally cloudless, of course, but the market bottom is almost certainly passed. And so, not only was it a great time to buy, believing in yesterday, but it is still a great time to buy so far, when the major stock recovery confirmed. If the rebound so far has "only" reached the 5,400 level in S&P 500 index terms, after a low near 4,800, then the minimum target can be set at 5,850, if not even above 6,000 again, when all the dust after a lasting negotiation period finally settles.
S&P 500 Index
As it is the most commonly used stock index it has some unique features a trader should keep in mind:
- The index represents the broad stock market performance since it lists companies from various sectors. It is not focused on specific industries or segments like the Dow Jones index family and the Nasdaq index. So, it is often called a “barometer of American economy;
- There are different sectors inside the index, which represent companies from familiar and particular sectors. According to numbers released on May 31, 2023 the smallest sector by market cap is Materials with a share of 2.4% (all numbers are given as of May 31, 2023), while the largest is Information technology with 28% of the index market cap. The index also lists companies from healthcare, financials, consumer discretionary, communication services, industrials, consumer staples, energy, utilities, and real estate. A sector breakdown allows investors to distinguish the best performing sectors and select the best performing stocks inside the sector. It also allows for the evaluation of economic performance of the United States in General and for a look at what is driving the American economy;
- The index is very sensitive to macroeconomic data, and positively reacts to rising GDP, retail sales, investments, and the phase in which houses are being built. Any negative news in these areas may push the index down. Macroeconomic data may have a sustainable effect on the index as declining GDP will put sustainable pressure on it, and vice versa;
- The index is very sensitive to the monetary policy decisions of the Federal Reserve (Fed). Rising interest rates and increasing borrowing costs result in less money in the economy and this leads to lower corporate margins, lower consumer and investment demand, and eventually to lower investments in stocks. So, the Fed’s hawkish stance usually results in a weaker S&P 500 index. A dovish monetary policy by the Fed usually supports the index. Thus, the Fed’s interest rate actions, testimonies of its head and FOMC voting members should be monitored;
- The Consumer Price Index (PCI) and the Personal Consumption Expenditures Price Index (PCE) data, which represent inflation, affect the index. If the numbers are far from the Fed’s target, which is set at 2%, it may signal to the possibility that the Fed may continue with its hawkish stance, meaning pressure on the S&P 500 index. Any increase of inflation means the pressure will rise. If inflation slows down to below the 2% target, it is likely to push the index up;
- The S&P 500 index is a risky asset as it represents the sentiment in the market, and the appetite for risk. A rising appetite for risk supports the index, while uncertainty, which lowers economy and geopolitical risks, put pressure on it;
- The index has a negative correlation with the USD/JPY as the Japanese Yen is regularly used for carry trading. So, a deteriorating Yen may signal to a decline of the index;
- The S&P 500 is a very popular asset for investments. An individual may invest in S&P futures, CFD’s of ETF’s that are linked to the index. This is a very diversified asset, and is suitable for conservative investors as it has lower volatility than any of its components, or even currencies or commodities. Thus, the index may serve as a hedge asset inside an investment portfolio;
- The index is linked to the U.S. stock market’s opening hours, but futures and CFD trading on the index continues mostly throughout 24/5, excluding weekends. So, the index may open with a gap if something very important has happened during a weekend.
| Ticker | US500 |
| Contract value | 10 USD x US500 Index |
| Maximum leverage | 1:100 |
| Date | Short Swap (%) | Long Swap (%) | No data |
|---|
| Minimum transaction volume | 0.01 lot |
| Maximum transaction volume | 100 lots |
| Hedging margin | 50% |
| USD Exposure | Max Leverage Applied | Floating Margin |
|---|
