S&P 500 Rally Accelerates on Trade De-escalation and Political Signals
Trade Thaw and Fed Tensions Propel Market Momentum
In a remarkable turnaround, the S&P 500 witnessed an impressive rise last week. Easing trade tensions and a temporary truce in U.S. political disputes greatly boosted investor sentiment. Four key catalysts contributed to this rally, as highlighted by Sevens Report:
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De-escalation of the U.S.-China trade war
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Softening of the Trump-Powell feud
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Excitement for new trade deal announcements
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Strong Q1 earnings reports
Tech and industrial stocks rallied as real-time top gainers showcased which names led this advance. Despite this surge, Sevens Report cautioned that “none of these events are materially bullish,” signaling potential weakness in the breakout above 5,500 without deeper fundamental improvements.
Concerns Loom Amid Valuation Issues
While it appears the market is thriving, lingering risks could temper the recent gains. Even though headline tariffs have decreased since their January peaks, the baseline rate remains significantly elevated, posing both growth and inflation headwinds. Sector valuations reveal a stretched landscape; data suggests that materials and industrials are trading near multi-year highs.
Political dynamics introduce further uncertainty. Although President Trump is not expected to remove Fed Chair Powellโaware of the shock this would have on the marketโthe feud may resurface as the Fedโs May 7 meeting approaches, with rate cuts remaining out of the question.
Additionally, forecasts for the 2025 S&P 500 earnings per share (EPS) could face downward revisions. Sevens Report projects a reduction in EPS from $270 to approximately $260 per share or lower, reflecting current market trends.