Capital is getting rid of illusions

SP500

Key zone: 6,600 - 6,700

Buy: 6,750 (on strong positive fundamentals); target 6,900-7,050; StopLoss 6,680

Sell: 6,550 (after a decisive break above 6,600); target 6,350; StopLoss 6,620

The United States stock market is reacting to macroeconomic signals: most assets remain in the red zone, and key indices continue to move lower. The main reason is the position of the Federal Reserve, which gives investors no hope for a quick return of cheap money.

High oil prices (around $100 per barrel) and new tariff restrictions are making inflation more persistent than expected. That is precisely why the Federal Reserve is in no hurry to ease financial conditions and continues to придерживаться a hawkish tone.

At the same time, the regulator assesses the state of the real economy as fairly resilient. GDP growth forecasts have been revised upward, largely due to increased business productivity. Even the slowdown in job creation is not perceived as a signal of an approaching recession — the Federal Reserve believes that migration restrictions, rather than economic weakness, are playing the key role here.

Additional pressure on the market came from Producer Price Index (PPI) data, which exceeded forecasts and confirmed ongoing inflationary pressure.

Let us recall:

The Federal Reserve kept the key rate at 3.75% — exactly what the market expected. However, what proved far more important was not the decision itself but the subsequent signals.

The updated forecasts imply only one rate cut in 2026 and another one — not earlier than mid-2027. Such a policy trajectory sharply reduces the likelihood of a rapid return to soft financial conditions.

The tone of the final statement and the press conference also turned out to be hawkish:

• inflation is still above the target level;
• uncertainty in the economy remains;
• the situation in the Middle East is considered one of the key risks.

Jerome Powell confirmed that the Fed’s baseline scenario does not imply a rate hike; however, further decisions will directly depend on external factors.

A significant portion of FOMC members are not considering a rate cut this year at all. The reason is tariff risks and the possible strengthening of inflation amid rising energy prices. These expectations also coincide with sentiment in the futures market, where skepticism about a rapid policy easing is also increasing.

Powell also acknowledged that the Federal Reserve cannot accurately predict how long the conflict in the Middle East will last, what will happen to oil prices, and how this will affect inflation and the U.S. economy. However, he promised to present a clearer assessment at the next meeting.

Markets also paid special attention to his political statements: he said that he intends to remain in the leadership of the Federal Reserve until the completion of legal proceedings and, in the event of a threat to the regulator’s independence, may continue his work even after they are over. This rhetoric should be viewed as an element of political bargaining with Donald Trump.

And what is the result?

Stock indices reacted with a decline: the S&P 500 and the Nasdaq 100 lost about 1%, while the Dow Jones Industrial Average fell by roughly 600 points.

In the corporate sector, pressure intensified even in defensive segments. Shares of Visa Inc. and Mastercard Inc. fell by about 3%, setting a negative tone for the payment services sector. Shares of B&G Foods and Walmart lost more than 2%, reflecting weakness even in traditionally resilient segments of the market.

At the same time, signs of cooling in the labor market are partially balancing the situation and leaving the Federal Reserve room for maneuver within its dual mandate. However, rising bond yields and more expensive energy after attacks on infrastructure in Iran continue to put pressure on the market.

The main conclusion for investors is obvious: the Federal Reserve is not going to save the stock market. High interest rates are here to stay for a long time — and this is the new reality.

So we act wisely and avoid unnecessary risks.

Profits to y’all!