The S&P 500 Index tumbled by over 7% in March as the war in Iran pushed the closely-watched Fear and Greed Index to its lowest level in months.
It was trading at 6,343 on Tuesday, down by over 9% from its highest point this year.
This article explores some of the top catalysts for the SPX Index and its top ETFs, like VOO and SPY.
SPX Index chart | Source: TradingView
S&P 500 Index to react to the US-Iran war
The main catalyst for the S&P 500 Index is the ongoing US-Iran war, which is now in its fifth week.
This war has led to a substantial increase in market volatility and a surge in energy prices, with Brent and West Texas Intermediate soaring above the key resistance level at [MONEY value=”100″ currency=”USD”].
There is a possibility that a de-escalation will happen in April this year. According to the Wall Street Journal, Trump has told allies that he is comfortable ending the war now that he has achieved his objectives of destroying Iran’s navy and air force.
Trump will also seek to reopen the Strait of Hormuz using diplomatic means. If there is no deal, he will leave the task to other countries, including those in Europe and Asia.
The challenge, however, is that Iran will have a say on when the war will end. Its goal is to extend it for a few months, possibly pushing oil and natural gas prices higher in the long term.
Therefore, the S&P 500 Index will react to any signs of progress in this war. Signs of escalation will push it deeper into a correction. On the other hand, signs that the war was ending will lead to a strong comeback in April.
US corporate earnings
The S&P 500 Index and its ETFs will also react to the upcoming earnings season, which will start on April 14 when companies like JPMorgan, Wells Fargo, and Citigroup release their numbers.
Other companies that will publish their numbers that week are Lockheed Martin, Bank of America, Morgan Stanley, Netflix, and Taiwan Semiconductor.
Data compiled by FactSet shows that analysts expect that the average estimate is that corporate earnings grew by 13% in the first quarter. If this is accurate, it will be the sixth consecutive quarter of double-digit gains. In the past, the actual earnings growth has always been higher than expectations.
Federal Reserve interest rate decision
The other major catalyst for the S&P 500 and funds like VOO and SPY in April is the third Federal Reserve interest rate decision of the year.
This will be an important decision as it will be the second one since the war started in February.
Economists expect the Federal Reserve to maintain interest rates at the current range of between 3.50% and 3.75%.
However, officials will deliver their statements on the war and whether it will push them to cut interest rates. Indeed, the bond market is sending signals that the bank may cut rates this year, with the ten-year and 2-year bond yields being in a strong freefall.
Private credit jitters
The S&P 500 Index will also react to the ongoing jitters surrounding the booming private credit industry.
Some of the top companies in the industry, like Blue Owl,BlackRock, and Ares Management, have all seen substantial outflows in the past few months, raising concerns about contagion in the industry. Traders will focus on whether the industry will continue seeing outflows.
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