Investing.com -- The S&P 500 has rebounded sharply in recent weeks, recovering all losses from the post “Liberation Day” sell-off.
According to Sevens Report analysts, that rebound is largely thanks to easing fears around trade war escalation and renewed optimism from the Trump administration.
“The reality of the trade war won’t be as bad as feared back in early April,” Sevens wrote, citing a larger-than-expected U.S.-China tariff reduction and “lots of Trump ‘happy talk’ on trade” involving potential deals with the U.K., South Korea, Japan, and India.
But Sevens cautioned investors not to mistake this relief rally for a sustainable bull run. “While I’m enjoying this morning’s rally I remain skeptical this news can push the S&P 500 sustainably towards (or above) 6,000,” the note said.
The more important takeaway, according to the firm, is that the so-called “Trump Put” — the idea that Trump will pivot policy to support markets if stocks fall far enough — appears to have moved higher.
“Markets freaked out in early April because, in part, investors feared the Trump Put wouldn’t occur until the S&P 500 was well in the 4,000s,” Sevens explained. “But the past few weeks implied the Trump Put kicks in somewhere in the mid-to-low 5,000s.”
That repricing is seen as a modest positive, as it limits downside risk. Still, the firm remains cautious, noting that “tariffs are going to be much higher than they were in January,” and policy volatility continues, including new threats targeting movies and pharmaceuticals.
With the S&P 500 trading above 21 times forward earnings, Sevens sees little room for error. “The news wasn’t as bad as it seemed when the S&P 500 was at 4,850 and I don’t believe it’s quite as good as it seems at 5,800. It’s somewhere in the middle.”