US stock markets are slowly recovering after a significant drop last Friday. This report looks at factors influencing the market, such as US-China trade tensions and recent earnings. There are concerns about the potential for 100% tariffs on Chinese goods from the US, which could spark a trade war and add port fees that impact global trade.

Federal Reserve Policy and Market Impact

The Federal Reserve’s monetary policy is a major point of interest, with expectations for rate cuts in future meetings. Mixed signals from Fed officials on how quickly they will ease monetary policy could affect market sentiment. If the Fed continues to ease policies, it might support US stocks. However, if expectations shift, this could lead to market declines. Recently, major US banks reported earnings that exceeded analysts’ expectations, which could boost market confidence. Upcoming earnings from well-known companies may also direct market trends. The S&P 500 has moved away from its all-time highs and is undergoing a correction. Technical analysis suggests a potential sideways trend, indicating the index might resist further drops but isn’t showing signs of a strong recovery yet. As of October 15, 2025, the market is in a state of uncertainty that derivatives could help manage. The main worry is the potential for 100% tariffs on Chinese imports by November 1st, creating a risk of a sharp market downturn. Traders should remember the market volatility during the 2018-2019 trade disputes and might consider buying put options on indices like the S&P 500 to protect their portfolios from a similar shock. This tension is reflected in rising market volatility, with the VIX index recently jumping to 19.5, much higher than the calm levels seen over the summer. This indicates that options premiums are increasing as traders prepare for potential large market moves. For those expecting a rise in volatility, regardless of direction, buying VIX call options or creating straddles on broad market ETFs could be a sensible strategy.

Key Federal Reserve Meeting

Looking ahead, the Federal Reserve will meet on October 29th, with expectations for a rate cut. Recent data shows annual inflation has eased to 2.8%, giving the Fed some leeway to adjust policy. Traders can use Fed Funds futures to position themselves for this possibility, but they should be cautious about any unexpectedly hawkish comments that might change market sentiment. Currently, the S&P 500 is moving sideways, trading between a key support level of 6420 and a resistance level at 6700. This well-defined range makes selling an iron condor an attractive strategy, as it could profit if the index stays within this range during the upcoming uncertainty. A clear break through either level could signal a new trend and an opportunity to exit such positions. Finally, with earnings season here, we can focus on how individual companies perform. Following strong results from major banks, upcoming reports from companies like Tesla and Netflix are expected to lead to significant price changes. Traders should consider using options strangles to take advantage of the anticipated volatility following these announcements, without needing to predict the specific direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now