S&P 500 outlook blighted by ongoing trade war uncertainty

After a choppy week, global markets finished mixed last week, with European indices showing further signs of stabilisation while US indices ended the week lower. President Trump’s claim of “big progress” in trade talks with Japan and TSMC’s steady 2025 outlook gave markets a boost on Friday, but let’s not get carried away: sentiment remains jittery as the market continues offering up a vote of non-confidence, via the dollar selling, in Trump’s economic policy. Adding to the concerns is Trump’s public anger towards Jerome Powell’s decision not to cut rates. The Fed Chair poured cold water on expectations of aggressive monetary support, stressing a more measured, wait-and-see approach, while the ECB cut rates for the 7^th consecutive time. Yet the EUR/USD still threatened to head towards 1.15 handle. Concerns about a deteriorating growth outlook amid trade war risks means the S&P 500 outlook is remaining not so certain. Another choppy week could be ahead of us, as attention turn to more company earnings.

Week ahead: PBOC, Global PMIs and UK retail sales

While the US economic calendar is quiet this week, we still have a number of important global data to look forward to in a holiday shortened week. It remains to be seen though whether the upcoming data releases will impact the S&P 500 outlook, given that all attention remains on tariffs and trade uncertainty.

1. PBOC rate decision - Monday, April 21

    

   Will the People’s Bank of China ease monetary policy further, given the tough, growth-chocking, trade policy from the US? The Chinese central bank will be sitting the 1- and 5-year Loan Prime Rate. These are the benchmark rates at which commercial banks lend to households and business. The last change was in October 2024, but with trade uncertainty rising, the PBOC might have to step in again to support local businesses reliant on US consumer.

    

2. Global PMIs - Wednesday, April 23

    

   We will get the latest Purchasing Managers’ Indices from around the world on Monday, with European ones likely to garner most of the attention. Let’s see if Trump’s trade war has already impacted business activity around the world. In Europe, Manufacturing PMIs have been improving ever so slightly, but still remain below the expansion threshold of 50.0. The recent drop in major Eurozone indices such as the DAX suggests investors are expecting recovery to slow in the months ahead amid trade war uncertainty, before the impact of the big German fiscal stimulus measures come into play.

    

3. UK retail sales - Friday, April 25

The last couple of retail sales print from the UK were both above 1%, and much higher than expected. The sales data suggest UK consumers are showing some reliance in the face of economic uncertainty, marked by still-high inflation and trade war uncertainty around the world. The pound has recovered significantly in recent times and could climb even higher should retail sales beat expectations again.

Earnings week ahead

Tesla and Alphabet are among the first of Magnificent 7 megacaps set to report their results. We will also hear from IBM, SAP and Intel, as well as the likes of Texas Instructions, Boeing, Merck, and PepsiCo. The result of these stocks could impact the S&P 500 outlook, at least in the near-term.

S&P 500 technical outlook

Source: TradingView.com

Looking at the charts, the S&P 500 outlook is not yet decisively bullish with the index unable to make further headway last week. Short-term support is seen around 5250 area, with 5090 being the next key level below.

On the upside, resistance comes in around 5385, followed by the area around 5490 to 5500. The latter, once a strong support zone before the recent breakdown, now needs to be broken with conviction to tip the scales back in favour of the bulls. Until that happens, any near-term strength should be approached with some scepticism.

Strategy: Stay Flexible, Trade the Levels

In a market where headlines drive swings and conviction remains scarce, flexibility is everything. The most valuable trading tip right now? Don’t marry a direction. Focus on trading level-to-level, keeping your bias in check and your risk tight.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R