Forex Analysis & Reviews: 08.05.2025 - The Market Will Save Itself

Live Chat

InstaForex - Official partner of Dragon Racing

This section features the most important information about trading with InstaForex. We provide both analysis from leading experts for experienced traders and articles on trading conditions for beginners. Our services will help increase your profit potential.

Become Trader

Account Opening

See also

Trading Conditions

Forex Analytics

Charts

This section is designed for those who are just starting their trading journey. InstaForex educational and analytical materials will meet your training needs. Our experts' recommendations will make your first steps to trading success simple and clear.

Start as Beginner

How to start trading

Useful information

Training and recordings

InstaForex innovative services are an essential element of productive investment. We strive to provide our clients with advanced technical capabilities and make their trading routine comfortable as we are recognized as the best broker in this regard.

Become Investor

PAMM System

ForexCopy System

Passive investments

OYS account

Partnership with InstaForex is beneficial and top-tier. Join our affiliate programs and enjoy bonuses, partner rewards, and the possibility to travel with the team of the world-renowned brand.

Become Partner

Main Page

Partner Area

Advantages for Affiliates

Registration

This section contains the most lucrative offers from InstaForex. Receive bonuses when topping up an account, compete with other traders, and get real prizes even when trading in a demo account.

All Promo Campaigns

Bonuses

Contests

Events

Holidays with InstaForex are not only pleasant but also useful. We offer a one-stop portal, numerous forums, and corporate blogs, where traders can exchange experiences and become successfully integrated into the Forex community.

Full details

Forums

We are in social networks

Forex humour

Forex Portal

InstaForex is an international brand created in 2007. The company provides services for online FX trading and is recognized as one of the world's leading brokers. We have won the trust of more than 7,000,000 retail traders, who have already appreciated our reliability and focus on innovations.

Learn More

History

Why Choose Us

InstaSport

Regulation

Company News

Awards

InstaForex Stars

InstaForex Offline

Headquarters

Key documents

Social Responsibility

InstaForex Loprais Team - Official participant of the Dakar rally

08.05.2025 10:13 AM

The Market Will Save Itself

The Fed is no longer the center of the financial universe, and the S&P 500's 13% rally from April lows has once again made U.S. equities expensive. That sums up the market's reaction to the results of the May FOMC meeting. The central bank left the federal funds rate unchanged at 4.5%, and Jerome Powell's remarks on the strength of the U.S. economy were enough for investor greed to overpower fear.

In previous years, only direct Fed intervention—including balance sheet expansion—could pull the S&P 500 out of the mud. This time, the central bank sees no need to throw a lifeline to the broad equity index. The White House is doing a fine job of that itself. Hints of de-escalation in trade tensions have become a stronger weapon in the bulls' arsenal than the Fed's willingness to cut rates.

Dynamics of the Fed Balance Sheet and Global Stock Market Index

The upcoming U.S.-China trade talks, President Donald Trump's announcement of a major deal with a serious and respected country—presumably the UK—and rumors that the new president might lift some of Joe Biden's restrictions on AI chip trade had a far greater impact on the S&P 500 than Powell's comments on U.S. economic strength.

The Fed's stated intention to hold the federal funds rate at 4.5% for an extended period could have scared the market. But why should the central bank cut rates before July 9, when Trump's 90-day tariff delay expires? It's the White House's policy uncertainty that underlies the Fed's passive stance.

At the same time, the higher U.S. stocks rise, the more expensive they appear. The S&P 500's valuation now significantly exceeds that of its European peers, potentially triggering capital outflows from the New World to the Old, clipping the broad index's wings.

Dynamics of P/E Ratios Across Stock Market Indices

Still, Citigroup strongly advises clients not to dump U.S.-issued securities—even if the economy slows and companies begin revising earnings expectations due to trade wars. Leaving the U.S. market is not the best move; instead, investors should diversify their portfolios.

JP Morgan believes the S&P 500 is more likely to reach 6000 than to experience a serious decline from current levels. A stronger-than-expected earnings season, positive trade developments, and bullish sentiment among retail investors are expected to drive the index higher. In my view, if the market isn't spooked by Fed inaction, pleasant surprises from the White House could push it even further.

Technical Outlook

On the daily chart of the S&P 500, the bears' inability to keep prices below the fair value level of 5617 is a sign of weakness—and a reason to resume buying on breakouts above the resistance zones at 5655 and 5695.

You have already liked this post today

*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.