The weakness reflects expectations of further Fed rate cuts and ongoing fiscal concerns. A softer dollar supports equities in the short term but strengthens the case for gold as a hedge against inflation and fiscal stress.
Gold remains in a long-term uptrend as investors hedge against bond market instability and rising debt. The near-term target for gold is $4,000. However, the long-term outlook stays strongly bullish, with prices likely to push above $4,000 through this cycle window.
How Macro and Market Forces Are Shaping US Equity Indices
The S&P 500 remains supported by liquidity, but stretched valuations are a growing concern. The Nasdaq benefits from falling rates, which lift tech valuations, yet it is vulnerable to sharp sentiment shifts if growth slows. The Dow Jones, with its cyclical exposure, is most at risk from labour market weakness and rising unemployment expectations.
In the near term, indices gain support from falling yields and abundant liquidity. However, long-term risks from fiscal debt, inflation, and weak consumer sentiment remain significant. Investors should watch the 10-year Treasury yield closely. A break below 3.9% could drive another equity rally, while a bond market selloff would threaten recent gains.
S&P 500 Analysis – Bullish Breakouts Point to Higher Targets
The weekly chart for the S&P 500 shows strong bullish price action. The index has formed an inverted head and shoulders pattern, with the head at 3,491.58 and the shoulders at 3,636 and 3,808.
This pattern broke above the neckline at 4,600, triggering a strong surge to new record highs. Since then, the index has been trading within a broadening wedge pattern, which keeps the outlook strongly bullish in the short term and signals potential for higher levels.