On February 28, 2025, the S&P 500 is set to open higher after erasing its gains for the year, as investors react to the uncertainty surrounding President Donald Trump’s economic policies. This follows several months of volatility strained by the looming threat of increased tariffs, which experts fear may usher in trade wars detrimental to market performance.
The index, which has dipped nearly 3% this month alone, is currently hovering just 1% above its closing level of 5,783 points recorded on November 5, 2024—the day of the Presidential election when market optimism initially surged. According to strategists from Bank of America Corp., the recent fluctuations reflect growing investor expectations for policy intervention intended to stabilize the stock market amid fears related to tariffs and inflation. Caroline McMillan, analyst at Bank of America, noted, “This reversal of the S&P 500’s post-election rally would likely trigger intervention by President Trump to bolster the indices.”
Market analysts suggest the recent selloff was particularly accelerated by Trump's announcement of additional 10% tariffs on China last week, following earlier tariff proposals. Investors are concerned about the impending impact of these tariffs on global trade dynamics and economic growth. Given rising long-term inflation expectations, related fears about potential economic slowdown have put the Federal Reserve on alert, leaving many questions about the speed at which it might adjust interest rates.
Compounding these issues was the release of the U.S. Flash Services PMI, which had indicated weakening economic activity, aligning with the rise to new 30-year highs for long-term inflation expectations per the final University of Michigan Consumer Sentiment survey. Analysts suggest this turmoil suggests the Fed may not respond swiftly enough to support the economy if growth begins to slow.
Strategists caution investors to remain vigilant as March approaches, bringing with it pivotal employment and inflation reports, preceding the Federal Open Market Committee's (FOMC) planned discussion on monetary policy. “The markets are relying on favorable data indicating strong employment and reduced inflationary pressures to rekindle bullish momentum,” stated McMillan. “Conversely, poor economic data paired with persistently high inflation could herald the onset of another bear market.”
Technical analysis of the S&P 500 has revealed significant momentum challenges, with indications of both downward pressure and possible rebounds. On daily charts, the index has approached key trend lines where buyers are stepping back to potentially position themselves for gains if the market moves upward. According to the analysis, “If we get a pullback, sellers look poised to increase their bets against the trendlines, with defined risks set above,” signifying complex trading dynamics at play.
At the four-hour mark, the picture becomes more focused as sellers lean on defined downward trends, anticipating additional selling pressures if new lows are confirmed. Meanwhile, short-term movements indicate buyers remain hopeful for market rebounds, especially if prices surpass established trend lines. Investment professionals are particularly attentive to these movements, as changes could indicate shifts between bear and bull markets.
Today’s market players are awaiting additional catalysts, particularly the U.S. Personal Consumption Expenditures (PCE) data release, expected later today. This report is considered key for guiding future decisions from the Federal Reserve and could influence market sentiment substantially. With both short-term and long-term expectations hanging in the balance, traders remain alert to the nuances governing S&P 500 movements.
Overall, as uncertainty looms over the stock market, driven by political and economic shifts, the S&P 500 encapsulates the broader concerns of investors. Trump's proposals are set against the backdrop of long-term economic strategies, making the situation fluid and requiring careful monitoring for potential impacts on portfolios and investment strategies moving forward.