Regarding the upcoming trajectory of the U.S. stock market, here is an analysis based on the latest information and market trends as of March 10, 2025. As the stock market is influenced by various factors (such as economic data, policy changes, geopolitical issues, etc.), predictions can only be reasonable speculations based on current conditions, rather than absolute conclusions.
Current market background
Recent performance
According to existing data, major U.S. stock indices (S&P 500, Nasdaq, Dow Jones) experienced some fluctuations at the beginning of 2025. At the start of the year, buoyed by optimistic expectations regarding Trump's second-term policies, the stock market reached new highs, but subsequently retreated due to the escalation of the trade war (such as tariffs on Canada, Mexico, and China) and uncertainties surrounding Federal Reserve policies. For instance, the S&P 500 fell nearly 6% over nine trading days in February and early March, marking the first negative turn for the year.
Posts on X reflected similar sentiments, with some users pointing out that the Nasdaq fell below the support level of 18831 points, entering a bearish trend; the Dow Jones approached the neckline at 41844 points, and if it breaks, it could form a 'large M top', indicating further downside potential.
Policy impact
Trump's tariff policy: The newly implemented 25% tariffs (targeting Canada and Mexico) and potential 60% tariffs on China have heightened market concerns about corporate profits, especially in sectors like automotive, aviation, retail, and housing. Institutions like Charles Schwab have pointed out that uncertainties surrounding trade policies may continue to trigger market volatility.
Federal Reserve stance: After a 1% rate cut in 2024, the Federal Reserve is expected to cut rates only two more times in 2025 (each by 25 basis points), which is more cautious than previously anticipated. Federal Reserve Chairman Powell stated that the economy is in a 'good state', but inflation remains above the 2% target (latest at 2.9%), which may limit further easing policies.
Economic indicators
GDP growth is expected to slow from 2.8% in 2024 to 2.0% in 2025, reflecting steady rather than deteriorating consumer spending. The job market remains in a 'Goldilocks' state (not too hot, not too cold), with an unemployment rate of 4.1%, supporting consumer confidence.
Manufacturing PMI returned to expansion territory (above 50) in January, but tariffs may threaten this recovery.
Possible trend analysis
Bullish factors
Corporate profit expectations: Ameriprise and Morgan Stanley forecast that S&P 500 companies will see profit growth of 10%-15% in 2025, with the technology sector continuing to be strong, while other sectors (such as cyclical industries) may benefit from relaxed regulations and economic activity. The market may shift from dominance by the 'Magnificent 7' to a broader sector rotation.
Policy optimism: Trump's tax cuts and deregulation policies may stimulate corporate investment and asset prices, partially offsetting the negative effects of tariffs. Charles Schwab believes that the stock market still has potential for growth from the beginning of the year to the end.
Global comparison: Although the U.S. stock market is highly valued (the S&P 500 P/E ratio is above historical averages), its attractiveness remains compared to other markets (such as Europe or China), and capital may continue to flow into U.S. stocks.
Bearish factors
Tariff and inflation risks: Tariffs may increase the cost of goods, combined with labor shortages due to tightened immigration policies, potentially reigniting inflationary pressures, forcing the Federal Reserve to maintain high interest rates and suppress valuations.
Technical pressure: Posts from X users and market analysis indicate that the Nasdaq and Dow Jones have fallen below key support levels, with a bearish trend in the short term. If the Dow Jones breaks below 41844 points, it may trigger larger-scale sell-offs.
Sentiment and volatility: If the VIX (Volatility Index) rises above 20, it may reflect a deterioration in market confidence. U.S. Bank points out that investor uncertainty regarding the impact of tariffs is driving up volatility.
Short-term (next few months) forecast
Consolidation: Given the ambiguity of trade policies and the cautious stance of the Federal Reserve, the U.S. stock market may continue to oscillate at high levels in the short term. The S&P 500 may consolidate around the current level (assuming early March was the low for the year), testing investors' confidence in the economy and policies.
Key levels: If the Nasdaq falls further towards 18000 points or the Dow Jones breaks below 41844 points, it may trigger a technical adjustment (a decline of 10%-20%). Conversely, if it can hold support and break through previous highs (such as the S&P 500's 5800-6000 range), it may resume an upward trend.
Medium to long-term (full year 2025) outlook
Mild increase: Several institutions (such as Morgan Stanley and BlackRock) believe that the U.S. stock market will not replicate the 20%+ surge of 2023-2024 in 2025, but it may still achieve a positive return of 5%-10%, relying on profit growth and policy support.
Sector opportunities: Technology stocks may continue to lead, but small-cap stocks (benefiting from low interest rates and relaxed regulations) and value stocks (with lower valuations) may have space for catch-up. International stocks (especially from Japan and India) may also attract some capital due to valuation appeal.
Suggestion
Investor strategy: Maintain caution in the short term, focusing on developments in tariff policies and economic data in late March (such as CPI and employment reports). Long-term investors may consider accumulating high-quality stocks (stable earnings, ample cash flow) on dips and diversifying investments to hedge against volatility risks.
Monitoring indicators: The Federal Reserve's March meeting, the first-quarter earnings season (in April), and the specific timing of policy implementations by the Trump administration will be critical turning points.
In summary, the trajectory of the U.S. stock market may experience a period of decline followed by a recovery. It is currently weighed down by policy uncertainties in the short term, but the medium to long-term outlook appears optimistic, supported by economic resilience and corporate profits. However, specific directions should closely monitor the evolution of the aforementioned variables.
