Trump’s tweet on April 9 regarding the moderation of tariff measures triggered a strong market rebound. Retail investors are buying the dip, contributing to this recovery, while institutional investors are actually net sellers. In April, capital flowed out of U.S. equities and mid- to long-term U.S. Treasury bonds.
We anticipate that both the Nasdaq and S&P 500 will rebound to the Fibonacci 0.618 level or slightly above, recovering about 62% of the entire decline since December 2024. We believe this rebound will be temporary, followed by another decline. Currently, both indices are approaching the Fibonacci 0.618 level.
While many people focus on tariffs and the trade war, the Trump administration is also facing an imminent national debt crisis. The total national debt stands at $36 trillion, with interest payments this year expected to be around $1 trillion—about one-fifth of the federal government's tax revenue. Additionally, $8 trillion will reach maturity this year, and $6 trillion will need to be rolled over in June. This is a significant amount, yet demand for mid- to long-term U.S. Treasury bonds remains weak. The Federal Funds Rate (short-term rate) is currently between 4.25% and 4.5%, while the yield on 10-year U.S. Treasuries is around 4.3%, both of which are high.
Trump wants to see these rates much lower, but Powell must first assess the inflationary impact of the tariff measures before considering any rate cuts. If inflation resurges beyond expectations, the Fed may be reluctant to cut rates. Consequently, the U.S. stock market could experience a sharp and rapid decline amid these uncertainties. A recession is likely arriving.
We anticipate that both the Nasdaq and S&P 500 will rebound to the Fibonacci 0.618 level or slightly above, recovering about 62% of the entire decline since December 2024. We believe this rebound will be temporary, followed by another decline. Currently, both indices are approaching the Fibonacci 0.618 level.
While many people focus on tariffs and the trade war, the Trump administration is also facing an imminent national debt crisis. The total national debt stands at $36 trillion, with interest payments this year expected to be around $1 trillion—about one-fifth of the federal government's tax revenue. Additionally, $8 trillion will reach maturity this year, and $6 trillion will need to be rolled over in June. This is a significant amount, yet demand for mid- to long-term U.S. Treasury bonds remains weak. The Federal Funds Rate (short-term rate) is currently between 4.25% and 4.5%, while the yield on 10-year U.S. Treasuries is around 4.3%, both of which are high.
Trump wants to see these rates much lower, but Powell must first assess the inflationary impact of the tariff measures before considering any rate cuts. If inflation resurges beyond expectations, the Fed may be reluctant to cut rates. Consequently, the U.S. stock market could experience a sharp and rapid decline amid these uncertainties. A recession is likely arriving.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.