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09.06.2025 10:06 AM
Old Donald the Fighter Seems to Have Broken Down (there is a likelihood of continued growth in CFD contracts #NDX and #SPX)

Despite all the hardships, uncertainty, and overall market tension, stock indices persistently climb higher. Investors believe that Donald Trump will have to back down and retreat in his confrontation with China and generally revert to the U.S. economic policies of past decades, albeit with some modifications.

Why do markets believe Trump has "deflated," that he is likely broken and will be forced to return to traditional U.S. economic policies?

It is evident that the 47th president of the United States remains under tremendous pressure from traditional American views on domestic and foreign policy, pushing him into a "Procrustean bed" of needing tangible results from his first 100 days in office — results that have not materialized. He failed to implement his grand campaign promises through a blitzkrieg approach, and pressure from large multinational corporations, along with the realization that his methods effective in real estate development are inapplicable to big politics, led to an important decision: expanding government debt to stimulate the national economy.

What does this mean for the markets?

If his plans to stimulate domestic production through tax cuts and similar measures are realized, it will trigger a new wave of dollar liquidity growth. Stock markets would warmly welcome this and could spark a new and sustainable surge in demand for company stocks. Consequently, stock indices could rise to unprecedented heights, further inflating substantial financial bubbles. Yes, Trump might attempt to stimulate the real sector of the economy domestically, but whether he will succeed remains a big question. Overall, the "good old" policy of living on borrowed money will undoubtedly lead America toward collapse — but when? That remains the ultimate question.

Meanwhile, considering these prospects, we can expect a gradual increase in demand for stocks and crypto market assets, a revival in Treasury yields, and a noticeable weakening of the U.S. dollar.

Currently, the decision to lift the debt ceiling has not been made, and investors will closely watch incoming economic data, particularly the consumer inflation figures from the U.S. scheduled for release on Wednesday. According to consensus forecasts, overall year-over-year inflation for May is expected to rise from 2.3% to 2.5%, with monthly growth maintaining a 0.2% pace. The core CPI is also forecast to rise from 2.8% to 2.9% year-over-year and from 0.2% to 0.3% month-over-month.

Under these conditions, if the report meets or exceeds expectations, we can anticipate local demand for the dollar, a decrease in interest in tokens, and a temporary cooling of demand for stocks. This would be a traditional reaction, given lowered expectations for rate cuts in the near future. However, such dynamics are likely to be limited.

Conversely, if the report shows continued slowing inflation, the opposite trend can be expected.

Forecast of the Day:

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This image is no longer relevant

#SPX

The CFD contract on the S&P 500 futures remains in a short-term uptrend. The prospect of a radical shift in Trump's economic policies could renew the demand for company stocks and push the index toward 6045.00. A buying point could be around 6019.06 after breaking above 6010.00.

#NDX

The CFD contract on NASDAQ 100 futures also remains in a short-term uptrend. Prospects of a radical shift in Trump's economic policy and an increase in dollar liquidity could renew demand for stocks and drive the index toward 22198.00. After breaking above 21840.00, a buying point could be around 21893.2.

Pati Gani,
Analytical expert of InstaForex
© 2007-2025
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