14.05.202509:32 Forex Analysis & Reviews: The Market Is Changing the Rules of the Game

Don't go against the crowd. According to Goldman Sachs and the Federal Reserve, individual investors held $35 trillion worth of U.S. stocks at the end of 2024, equivalent to 38% of the entire market. So when U.S. stock indices dipped into bear territory in early April, and the S&P 500 lost $6.6 trillion in capitalization, they did what they had been taught over the past 15 years: they bought the dip. The 17% rally in the stock market is driven by the crowd, following guidance from the White House.

U.S. Stock Index Dynamics

S&P 500 swings like the ones we saw in April–May usually only happen during crises. This time, the crisis was artificially manufactured. Massive White House tariffs—the highest since the early 20th century—fueled investor fears of an impending U.S. recession. Now, JPMorgan has abandoned its recession forecast and raised its GDP outlook. JPMorgan, along with Goldman Sachs and Barclays, is now postponing expectations of the Fed resuming monetary easing from July–September to December. Would they be doing that if they believed the U.S. economy was freezing up?

Greed has returned to the stock market. Yardeni Research claims investors have the upper hand over Donald Trump, forcing the president to dance to their tune, and has raised its S&P 500 target from 6000 to 6500 by year-end. Previously, the firm had twice downgraded its forecast. It now says it can change its opinion as often as the man in the White House does. Not to be outdone, Goldman Sachs raised its S&P 500 forecast to 6100 by the end of 2025, citing lower tariffs and a stronger economy.

Reports that major crypto exchange Coinbase would be added to the S&P 500—boosting its stock—along with China's resumption of Boeing aircraft purchases and a statement from Donald Trump that Saudi Arabia plans to invest a colossal $1 trillion in the U.S. economy added fuel to the rally. After the U.S.-China trade de-escalation, the broad stock index needed a new growth driver, and it got one.

U.S. Inflation Dynamics

Despite slowing U.S. inflation in April and renewed calls from the White House for the Fed to cut interest rates, the S&P 500 has approached its record high. The gap is a modest 4.4%, and a crowd fueled by success dreams of a new all-time high. However, experts are raising concerns: a market with constantly changing rules is extremely dangerous. Much of the positive news is already priced into equities. The moment to "sell the fact" is quickly approaching.

Technically, the daily chart for the S&P 500 shows a test of major resistance at 5900. A pullback allowed traders to lock in profits on previously opened long positions, reverse, and go short. A successful retest of this level would be grounds for new purchases of the broad stock index.