S&P 500 Index
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One more clearly palpable proof that all those tariff-driven dips on Wall Street were nothing else than splendid buying opportunities. Our analyst team proclaimed a great time to buy throughout the whole month of April often and loudly so that your ears probably became stuffed with our bullish estimates. But now the fairness of these predictions is finally confirmed as a fact. The uptrend in global stocks has already resumed slowly but steadily, with some newly emerged details about the Sino-U.S. trade deal breakthrough generously slathering of icing on this cake after the weekend.
The general terms of behind-the-scenes talks between Washington and Beijing have ultimately come to light, and the U.S.-U.K. agreement was actually concluded just a few days ago. This had an immediate impact, so that the tech-heavy Nasdaq Composite index closed on Monday, May 12, with a 4.35% of daily gains, while the broader market S&P 500 barometer added 3.26% within 24 hours to climb more than 1,000 points higher compared to its early April lows, approaching to 5,850 after plunging to nearly 4,800 just a few weeks ago. The performance of individual megacaps looked even more convincing. The e-commerce platform and cloud capacity provider Amazon (AMZN) soared by 8.07%, the owner of Facebook and Instagram Meta Platforms grew by 7.92%, with the electric car flagship Tesla (TSLA) adding 6.75% only this Monday. The iPhone maker Apple (APPL), which is heavily dependent on assembly in China, recovered by 6.31%, and dominant AI chip manufacturer NVIDIA (NVDA) bounced by another 5.44%.
When it comes to specifics, basically everyone probably read the news that the two great nations, the U.S. and China, said in a rare joint statement on their moving to cut Donald Trump’s so-called "reciprocal" import tariffs on China goods from impossible 145%, effectively amounted to a trade embargo, to quite normal 10%, even though his first term's 20% tariff related to Beijing’s alleged role in the flow of the illegal drug fentanyl remains in force. Meanwhile, China's levies on U.S. imports are being cut from a recent spike to as high as 125% to 10%. More negotiations are surely planned, while both sides may conduct working-level consultations on relevant economic and trade issues, the countries said. The U.S. Treasury Secretary Scott Bessent commented during a news conference that there is now a "good mechanism" to avoid any further ratcheting up in tensions but the main thing is that "neither side wanted a decoupling". Jamieson Greer, the U.S. trade representative who was also present at the discussions, said that the differences between the two nations were not as significant as previously assumed, being confident that "the deal we struck with our Chinese partners will help us to work toward resolving" on the trade deficit issue.
It is clear that the voice of the Chinese side is still heard weaker than the boasts of officials from Trump's team, but there is no doubt that there will be words of response from Beijing as well. China will probably have to agree to buy more goods like soybeans or heating oil from America to improve the trade balance disgrace, and also agree on how to legally purchase proper chips for AI, as well as tighten controls on fentanyl smugglers. In the meantime, global suppliers are trying their best to get as much cargo from China as possible, while the 90-day trade truce is still in effect for sure, and so world trade has immediately picked up.
However, even if more precise agreements will be postponed or suspended for some time, and would become weaker than initially announced, so that the mutual tariff levels may be not as convenient as many expect after Bessette's words, for example, then this can only partially affect the rising trajectory of Wall Street assets, but not their final destination at more than 6,500 or even 6,850 points which is another 1,000 points higher than even current quotes. We also estimate the fundamental foundation of this skyward rush on Wall Street as even more solid in light of observations that even before the apparent clarification with trade deals, the rise continued unabated after a relatively hawkish stance of the U.S. Federal Reserve on May 7, which was unable to significantly curb the ascending sentiment.
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 |
|---|
