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06.02.2025 03:18 PM
U.S. Stock Market Faces a Difficult Year

According to a JPMorgan Chase & Co. study, this week's turmoil in global financial markets, triggered by a series of U.S. tariff announcements and trade restrictions, appears to mark the beginning of an unstable year. The bank's annual survey indicates that the biggest market drivers in 2025 will be inflation and protectionist tariffs, followed by geopolitical tensions. Around 41% of respondents cited volatility as the most pressing daily trading challenge, compared to 28% last year.

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In 2025, inflation is expected to continue exerting significant pressure on global markets. Countries facing rising inflation rates will be forced to tighten economic policies—including raising or maintaining interest rates and cutting government spending—as key tools to combat price increases. These measures will likely affect consumer spending and investment activity, posing risks to economic growth.

Meanwhile, protectionist tariffs, introduced to shield domestic manufacturers, will reshape market structures. Such measures could raise import costs, further exacerbating inflation and reducing living standards. Moreover, they may provoke retaliatory actions from trading partners, escalating global trade conflicts.

"This year brings an unexpectedly volatile environment," the JPMorgan report states. "Markets are reacting to headlines in surprising ways, and this trend appears likely to continue."

Traders remain on edge due to the uncertainty surrounding the impact of tariffs on different asset classes. The annual survey of more than 4,200 institutional traders was conducted before U.S. President Donald Trump rattled global markets with a wave of trade tariffs. These concerns are expected to fuel currency trading, particularly in the Canadian dollar (CAD), Mexican peso (MXN), and offshore Chinese yuan (CNH), while also casting doubt on the continued upward trajectory of the U.S. stock market, including the S&P 500 and Nasdaq.

Tariffs, Inflation, and the Market Response

The risk that higher import prices could reignite inflation has persisted since Trump's election in November, dashing hopes that the Federal Reserve would pursue further rate cuts this year.

Following Trump's directive to impose 25% tariffs on all imports from Canada and Mexico, which he later postponed after leaders of both nations pledged stronger efforts to curb illegal immigration and drug trafficking, risk appetite briefly returned to financial markets. However, whether Trump will maintain his wait-and-see approach remains a key question.

Stock markets, including those in Asia, have also recovered. A broad 10% tariff on Chinese imports has already taken effect, yet Beijing's response has been relatively mild, fueling speculation that neither side wants to escalate a full-scale trade war.

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S&P 500 Technical Outlook

Demand for the S&P 500 remains strong. The key objective for buyers today will be to break through resistance at $6,069. Achieving this would sustain the upward trend and pave the way for a push toward $6,079.

An equally important bullish target will be controlling $6,092, which would strengthen buyers' positions.

However, if the index pulls back due to declining risk appetite, buyers must defend the $6,058 level. A break below this level could push the index further down toward $6,047 and $6,038, opening the door to deeper corrections.

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