S&P 500 Rises Amid Easing Trade Tensions and Political Optimism

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The S&P 500 index experienced an uptick last week, fueled by easing trade tensions and a wave of political optimism. According to insights from the Sevens Report, several factors contributed to this positive trajectory. In terms of significance: the softening of the trade war with China, reduced friction between President Trump and Federal Reserve Chairman Jerome Powell, heightened expectations of forthcoming trade agreements, and robust first-quarter earnings.

However, the Sevens Report also issued a word of caution: “None of these developments are fundamentally positive. While the prevailing negative sentiment might temporarily propel the S&P 500 beyond 5,500 with favorable earnings or further relaxation of trade tensions, the news hasn’t improved sufficiently to sustain a prolonged rally.” The strategist highlighted that the tensions between Trump and Powell are yet to be fully resolved, stating, “Trump understands that dismissing Powell would adversely affect the markets, so he (probably) won’t attempt it. But this doesn’t necessarily mean the negative headlines have ended.”

Looking at the Federal Reserve’s stance, the Sevens Report added, “The Fed’s upcoming meeting is on Wednesday, May 7, and it is highly improbable that a rate cut will be announced at that meeting, which could provoke Trump’s discontent.”

On the trade front, while tariff reductions are preferable to escalations, the Sevens Report noted, “The baseline tariff level remains significantly higher than in January, posing a drag on both growth and inflation.” Projecting into the future, the report suggests, “It is highly unlikely that the 2025 S&P 500 earnings per share expectations will maintain the $270 target. A reduction by $10/share to $260 (or lower) seems more plausible.”

In conclusion, the Sevens Report summarized: “Last week’s developments were positive, yet not sufficient to alter my perspective that the S&P 500 remains largely constrained within the 5,100 to 5,500 range.”

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