S&P 500 Stuck in Neutral as Geopolitical Tensions Rise
The S&P 500 index has been struggling to find direction near record highs. Recent trading sessions have seen average price movements of less than 1.00%, a figure below the fluctuations seen weeks ago when daily moves above 1.5% were common.
This slowdown in market activity is beginning to give greater relevance to a phase of neutrality, where demand faces an environment with limited appetite for risk assets due to geopolitical tensions and uncertainty surrounding the Federal Reserve's future actions.
The increase in tensions between the United States and Iran has raised concerns about potential global inflationary pressures. WTI crude oil has advanced toward $90 per barrel, increasing the market risk premium.
Markets are also pricing in a possible interest rate increase toward 4.00% at the next monetary policy decision in September, which could further reinforce the perception of room for a more aggressive stance from the central bank if economic conditions continue to show resilience.