Markets in Focus
Exceptional volatility in US equity markets
Trade policy developments have emerged as the primary catalyst driving market performance over the past fortnight. Asset prices were whipsawed with extreme volatility — the Dow Jones experienced daily trading ranges exceeding 2,000 points during three sessions of the five-day trading week, while the volatility index (VIX) oscillated between 30 and 60. Despite this heightened turbulence, the Nasdaq 100 index recorded a 7.4% gain, with the Dow Jones advancing 5.0% for the week.
While headline inflation appears contained according to the March CPI data release, consumer sentiment indicators show marked deterioration, with the latest University of Michigan Consumer Sentiment Index registering at 50.8, substantially below consensus. Paradoxically, forward-looking consumer inflation expectations for the upcoming 12-month period surged to 6.7%, reaching levels not observed since 1981. This divergence is aligned with the Federal Reserve (Fed) concerns regarding potential stagflationary pressures, with tariff-induced inflation likely to delay planned interest rates cuts.
Technical analysis indicates the US Tech 100 Index is consolidating near its 20-day simple moving average (SMA) following a significant rebound from 16,324, which now constitutes a key support level. The recent price recovery has normalised the relative strength index (RSI) to neutral territory, suggesting a temporary equilibrium between buying and selling pressures. For a sustainable reversal of the prevailing downtrend to materialise, the index would need to breach and maintain position above the technically significant 200-day SMA at 20,475. Substantial resistance level is anticipated at approximately 20,400, potentially constraining upward momentum absent meaningful improvement in global trade relations.
As the earnings reporting cycle accelerates, investors will scrutinise forward guidance from corporate executives to navigate current market turbulence. Any substantive developments in trade negotiations will prove decisive in determining near-term market direction.
