S&P 500 Rally

The S&P 500 surged to all-time highs last week, despite a backdrop of international tensions and intensifying tariff wars. The index has climbed roughly 27% since hitting a 15-month low in early April, a period marked by reciprocal tariffs between the U.S. and key trading partners. Yet this rally has little to do with the tech giants that traditionally lead. The Magnificent 7 underperformed the broader index following Trump’s Liberation Day tariffs, dipping more sharply than the remaining 493 constituents.

Instead, this rebound has been powered by surprising strength in overlooked areas of the market. For instance, Dollar General has gained over 50% in the past six months, driven by margin improvements and steady performance. This could be a sign that investors are looking into resilient, and more earnings-focused names.

Another driver behind the rally is shifting expectations around monetary policy. While the Fed held back on rate cuts in response to rising tariffs, many believe that rates should be cut and that longer-term yields will fall soon. President Trump has criticized the Fed’s hesitation and has applied pressure for a near-term rate cut. Despite this, Chair Powell has reiterated that any policy changes will be made only when conditions require action. Still, many investors argue that the inflationary effects of tariffs are overstated and that cuts may be appropriate sooner rather than later.

Last week’s market surge reflects more than just optimism. It signals a potential broadening of leadership and a reassessment of interest rate policy. Investors are watching closely as macro forces collide with an increasingly resilient equity market.