Tariff Truce Sparks a Rally—But Don’t Confuse That with Value. (When in doubt, buy the big name; that’s what the institutions did.)
When President Trump announced a tariff rollback on Chinese imports in early April, marking a sudden about-face from his “economic warfare or bust” stance, it didn’t just change policy. It lit a fire under Wall Street so intense you’d think Powell had restarted QE behind everyone’s back.
Markets rallied. Bigly.
The S&P 500 has surged nearly 20% since the announcement, with headlines trumpeting the return of “risk-on” appetite. But let’s not get too carried away—this was less a broad-based recovery and more of a narrowly focused stampede into the same old mega caps that have been carrying this market like Sherpas on Everest.
The Magnificent Seven (Again)
The bulk of this rally can be attributed—stop us if you’ve heard this one before—to Apple, Microsoft, Alphabet, Meta, Nvidia, Tesla, and Netflix. Together, these seven stocks accounted for well over 25% of the index’s recent gain, which is impressive until you remember that the S&P 500 has 493 other companies in it. What’s more impressive? Their valuations. As of mid-May, they’ve returned to full froth:
- Microsoft is trading north of 35x earnings.
- Nvidia? Let’s just say it stopped pretending gravity matters.
- Apple’s earnings growth is still in the single digits, but why let that get in the way of a 20% multiple expansion?
This isn’t broad market strength. It’s a rerun—same characters, same plotline, new episode.
Tariff Relief: The Spark, Not the Fuel
To be clear, the reduction of Chinese tariffs—from a punishing 145% in some cases down to a more tolerable 30%—was a welcome move for multinational tech and industrial firms. The tariff rollback helped revive sentiment, cut costs on imports, and temporarily cooled fears of a drawn-out trade war 2.0. But here’s the thing: it didn’t fix corporate earnings. It didn’t fix profit margins. It didn’t fix structurally high interest rates or slowing global demand. It just made things less bad.
Wall Street, in its infinite optimism, priced this in as if 2021 had returned. It hasn’t.
Valuations Are Loud. Fundamentals Are Quiet.
The market is once again trading at a forward P/E north of 21. That’s above the 5-year average (19.9), the 10-year average (18.3), and definitely above anything you’d call a “bargain.” With earnings growth estimates still tepid—outside of AI-hype names—the current pricing assumes immaculate execution across sectors and a soft-landing economy that threads a needle between inflation, rate cuts, and global instability.
In other words, a lot of hope. Not a lot of cushion.
Patience May Pay
If you’re a long-term investor, jumping into a market that’s just levitated off a single policy headline, fueled by seven stocks now priced like they’re guaranteed monopolies, might not be the best timing. We’re not saying stocks are headed for an immediate crash, but we are saying the setup now looks eerily like prior blow-offs where emotion beat fundamentals… until fundamentals reminded everyone they exist.
To paraphrase a classic: you don’t make money when you buy or sell—you make money when you wait. And after a vertical move driven by policy whiplash and concentrated FOMO, waiting might just be the smartest trade on the screen.
Bottom Line: Trump’s tariff truce sparked the rally. Seven mega-cap stocks fueled it. And now the market’s back where it loves to be—expensive, concentrated, and overconfident. If you missed the run, don’t worry. A better entry might still be ahead… assuming you believe in gravity.
As of May 16, 2025, the S&P 500’s price-to-earnings (P/E) ratios are as follows:
- Trailing 12-Month P/E Ratio: 28.39.
- Forward 12-Month P/E Ratio: 21.4.
These figures indicate that the S&P 500 is currently trading at valuations above its historical averages. Specifically, the forward P/E ratio of 21.4 surpasses the 5-year average of 19.9 and the 10-year average of 18.3, suggesting that investors are paying a premium for expected future earnings.
As of May 16, 2025, Apple, Meta, Netflix, Alphabet, Microsoft, Nvidia, and Tesla together accounted for 213.13 points of the S&P 500’s total 975.61 point gain since April 8, 2025.
Dollar value has increased since 04/04/2025:
- Microsoft: $100
- Apple: $39
- Alphabet: $20
- Nvidia: $41
- Meta: $136
- Tesla: +$100
- Netflix: +$336
40% of S&P 500 gains are in 7 stocks; 60% comes from 493.
The S&P 500 has gained approximately 983 points since April 8th, 2025, when it hit a low of 4,982.77 following President Trump’s tariff announcements. The current value is around 5,965.78.
Here is the contribution to the gain in the S&P 500 of each of the seven tech stocks to this 983-point gain:
- Nvidia: 109 points (11.07% of total gain)
- Apple: 82 points (8.33% of total gain)
- Microsoft: 63 points (6.38% of total gain)
- Alphabet: 39 points (3.99% of total gain)
- Meta: 35 points (3.53% of total gain)
- Tesla: 33 points (3.41% of total gain)
- Amazon: 29 points (2.99% of total gain)
Together, these seven tech stocks contributed 390 points to the S&P 500’s 983-point gain, which represents 39.68% of the total increase. The remaining 493 S&P 500 stocks made up 60.32% of the gain in the index.
Summary TLDR:
We’re getting close. Expect the word “recession” to dominate headlines in the coming months—I’ll break that down for you tomorrow. (Spoiler: not everything you hear in the media is gospel.)
If you followed the signals and stayed in cash, well done. If not, now might be a smart time to take some chips off the table. Don’t make me say that again.
This was a bear market rally sparked by an announcement on tariffs. A lot has changed. I will go over that tomorrow.