Forex Analysis & Reviews: 19.05.2025 - The Market Has Gone Too Far

Live Chat

InstaForex Loprais Team - Official participant of the Dakar rally

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

19.05.2025 09:18 AM

The Market Has Gone Too Far

Nothing seems to matter. One would think that after the White House signed trade agreements with Britain and China, and following Donald Trump's visit to the Middle East, the S&P 500 would be losing momentum. Especially given the disappointing macroeconomic data out of the U.S., the unwillingness of the EU, Japan, and South Korea to make compromises, and the downgrade of the U.S. credit rating, all factors should have pushed the broad stock index lower. However, when a frenzied crowd takes charge, there is no guarantee the laws of economics will hold.

Moody's has become the last of the three major agencies to strip the U.S. of its highest rating. In theory, this should accelerate the sell-off of U.S. bonds, increase their yields, and push stock prices lower. By the way, stocks already look expensive by various price-to-earnings (P/E) metrics. Indeed, while the U.S. market trades at 23 times forward earnings, in the rest of the world it's just 14 times.

S&P 500 P/E Ratio Trends

The more than 20% rally in the S&P 500, fueled by investor enthusiasm, is certainly noteworthy. However, since the start of the year, the broad stock index has only gained a meager 1.3%. For comparison, the EuroStoxx 600 is up 8%, and Germany's DAX 40 is up 19%. In U.S. dollar terms, the European indexes have gained 17% and 28% respectively. No wonder capital continues to flow from North America to Europe.

At the heart of this is the loss of American exceptionalism. The only question is whether this is a temporary retreat due to excessive bets on U.S. equities in past years or the beginning of America's long and painful decline relative to the rest of the world.

Global vs. U.S. Stock Market Performance

In 2024, U.S.-listed stocks accounted for two-thirds of the global MSCI equity index. The 10 most valuable companies in the world were all American. Over the past five years, the U.S. economy has vastly outperformed its rivals, and the USD index has reached heights not seen since the Plaza Accord of 1985. America held undisputed leadership in innovation, productivity, and finance. In other words, exceptionalism had gone too far.

Donald Trump's return to the White House jolted investors awake. The growing unpredictability of U.S. policy demands diversification in investment portfolios. The U.S. is no longer a safe haven for capital. Returns are lower than in Europe, and the risks are no less significant. This leads to the conclusion that the U.S. stock market may continue to underperform, no matter how much the crowd inflates the bubble. Isn't it time for it to burst?

Technical Outlook

Technically, the daily chart of the S&P 500 shows the continuation of a rally. Long positions initiated from the 5900 level still make sense to hold. However, a drop below this level or a rebound from resistance zones at 5980 and 6040 would signal to start selling the broad stock index.

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.

If you have any content questions, please contact editorial-board@instaforex.com

# USD # American markets #SPX #SP500 Fundamental analysis