S&P 500 correction becomes more probable as tariff pressures mount

Today (August 11, 2025), the S&P 500 (SPX) index opened at 6,399.4. While strong corporate earnings reports have supported the US market over the recent weeks, market sentiment has become more susceptible to economic risks. Traders have already priced in potential rate cuts by the Federal Reserve (Fed), which could come as early as September. But concerns over inflation prevent quotes from growing further.

The threat of rising consumer prices from Trump's tariffs remains a key concern, with average duties now standing at 15.2% and pushing inflation higher. The CPI release on August 12 is expected to show the index’s increase to 2.8%. If it climbed above this level, investor confidence in September’s rate cut by the Fed could be shaken. Meanwhile, the strong performance of the Magnificent Seven stocks has masked growing pressures in consumer and manufacturing sectors, where profits are stagnating or declining due to import-related challenges.

Seasonality and technical indicators also forced investors to be cautious, as August and September are typically considered to be weak months for the S&P 500 index. The corporate credit market is already showing signs of overheating. Since its conditions often precede changes in the stock market (as occurred in 2018 and 2022), the current situation reinforces fears of future SPX declines.

On the technical side, the stock market, on the contrary, is showing an uptrend. At the same time, there is a gap between the MACD line and the signal one, which indicates the continuation of the upside. However, the Stochastic Oscillator suggests that the asset is in overbought territory, which could signal an imminent correction or the beginning of consolidation.

Consider the following trading plan:

Sell SPX at the current price, given the asset’s overvaluation (P/E 22x against the historical 15,8x) and risks of rising inflation. Take Profit: $6,200 (July’s support level). Stop loss: $6,450 (slightly above an all-time high).

The forecast could come into effect from August 11 to August 18, 2025.