Who will save the US stock market this time, Trump or Powell?

After three consecutive weeks of decline, the S&P 500 index fell below the 200-day moving average on Monday, marking its first entry into what is referred to as the "danger zone" in the market. However, unlike in the past, analysts generally believe that neither the Trump administration nor the Federal Reserve is likely to intervene as quickly as before.

On Monday, the Nasdaq dropped 4%, and the S&P 500 index fell 2.7%, closing at 5614.56 points, below the technical support level of the 200-day moving average at 5734.77 points, the first time since November 2023.

"Good things won't happen after breaking below the 200-day moving average"

The 200-day moving average is viewed by investors as an important technical indicator for assessing the long-term trend of the market. There is an old saying on Wall Street: "Good things won't happen after breaking below the 200-day moving average."

Callie Cox, Chief Market Strategist at Ritholtz Wealth Management, stated:

"In the danger zone—i.e., the space below the 200-day moving average—selling will accelerate, and market volatility will significantly increase."

According to Cox's research, since 2000, the S&P 500 has broken below the 200-day moving average 18 times during downturns, of which 11 times the stock market quickly recovered or experienced limited further losses, while in the other 7 instances, the U.S. stock market continued to decline.

Will the Trump administration or the Federal Reserve intervene?

Unlike previous declines in the U.S. stock market, market analysts believe that there should be no expectation for the Trump administration or the Federal Reserve to intervene this time:

Change in the Trump administration's stance:

• U.S. Treasury Secretary Janet Yellen explicitly denied the existence of a "Trump put" last week, stating that as the Trump administration implements spending cuts and tariff agendas, the U.S. economy will undergo a "detox period";
• Trump himself, in an interview with Fox Business Channel's Maria Bartiromo, did not deny the possibility of an economic recession but stated that the economy will have a "transition period."

Constraints facing the Federal Reserve:

• Insufficient progress in slowing inflation limits the Federal Reserve's room for action;
• Although the market expects more rate cuts in 2025, the Federal Reserve remains in a wait-and-see position.

In this regard, Julian Emanuel, Chief Equity and Quantitative Strategist at Evercore ISI, warned:

"If the S&P 500 significantly falls below 5700 points and Trump’s policies do not adjust, it indicates greater downside risk."

Some analysts believe that if the U.S. stock market continues to decline, the Trump administration may still take measures, with Mark Gibbens, investment strategist at BOK Financial, stating:

"I still believe there is a 'Trump put,' just at a lower trigger point than we thought at the beginning of the year."

Trump's Chief Economic Advisor: Q2 Economy Expected to "Take Off"

On Monday, Trump's economic advisor, Kevin Hassett, who leads the White House Council of Economic Advisers, stated in an interview with CNBC that despite some predictions of negative GDP growth for the first quarter of this year and concerns about rising inflation, there are still many reasons to be optimistic about the U.S. economy.

Hassett noted that Trump's trade policies are beginning to yield expected results, bringing manufacturing and jobs back to the U.S. He believes that the tax cuts from the Trump administration will boost the economy, increase investment, and raise real wages in the second quarter, offsetting any negative impacts from tariffs. He anticipates that the first quarter will barely show positive growth, while the second quarter will "take off."