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Indices: a step up despite extreme fear
Indices: a step up despite extreme fear
The major US indices have been rallying since the end of last week and gained even further ground this week following the FOMC's post-interest rate decision comments.
As we warned last week, oversold conditions in equity indices attracted buyers, and the S&P500 added over 3% to last week's lows. Meanwhile, the index remains below its 200-day moving average, suggesting that the bears continue to dominate.
CNN’s Fear and Greed Index is still in Extreme Fear despite a steady recovery since early last week. A rebound to levels above 25 here could be followed by more active buying in equities. For now, that moment is just around the corner, and it is worth being patient and cautious so as not to fall into the bear trap of increased selling after a small rebound.
The main factor weighing on equity markets is the growing fear of an economic contraction or recession as a shock from the tariff wars. However, the markets have seen it all before in the first term of the Trump presidency. Then, as now, there was a lot of media noise and international chatter, but the global economy did not go into a downward spiral, and the risk of a repeat of the tariff wars of a century ago remained just a scary story.
By the FxPro Analyst Team
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