Valuation Pressures and Tariff Fears Drive Market Reversal

At the start of 2025, the Magnificent Seven—comprised of Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla—faced notable declines. Their high valuations collided with concerns surrounding President Trump’s expansive tariffs, causing fund managers in a BofA survey to prefer gold over tech for the first time in two years.

Trade Truce Fuels a Tech Comeback

Since the U S government paused key tariffs on April 9, these technology giants have experienced a revival in stock prices, in tandem with the overall market. Art Hogan of B. Riley Wealth notes that as sentiment shifts from de-risking to risk-on, “all things technology—including the Magnificent Seven—usually lead the way.”

Investors with ETFs holding concentrated tech positions have witnessed relative gains; for instance, SPDR’s sector allocations highlight technology’s influential role in key benchmark funds.

Upcoming Earnings: A Crucial Test Ahead

Four members of the group will report earnings this week:

• Wednesday: Microsoft and Meta

• Thursday: Apple and Amazon

These earnings reports will be pivotal in determining whether the recent rally is sustainable or merely a correction. Historical trends indicate that missing consecutive strong performance days can dampen future returns, marking these earnings as important for tech-heavy portfolios.

Will Tech Maintain Its Momentum?

Key considerations to monitor include:

1. Earnings Surprises: Will forecasts for revenue and profit margins exceed analyst expectations?

2. Tariff Developments: Any shifts in trade reprieves could reintroduce volatility.

3. Market Rotation Risks: As valuations rise, investors may take profits and pivot to cyclical or defensive sectors.