A few months back, before the April tariff crash (did people actually think 2025 Trump was going to be different than 2021 Trump?), I wrote a number of articles of how the US markets are trading in a choppy fashion, full of air pockets, climactic pump and dump, and blue-chip mania.
Though most FOMO leaders of the day had already collapsed back in January or earlier (see here or here), the equity markets have stomached recent volatility well and rallied almost back to old Highs. An interesting dynamic, for if the crash was caused by the tariffs, what will have really changed when the suspension lifts soon? Chinas tariffs have exploded to 55%, and there are baseline 10% tariffs in place on almost all other important marketplaces – that might not sound much, but these are staggering numbers.
In any case, market participants see anything happening recently as something good – tariffs, economic data, surveys, wars. The SP500 barely budged down on the Iran bombing, but leaped up on the ceasefire…
Markets have re-entered the same dynamic as before the April crash – blue-chips and old-world NYSE-type stocks, specifically industrials and defense/aerospace issues leading, exuberant climax moves in AI FOMO issues, and leaders that had collapsed 55-80% now back at old Highs after multiple-hundred-percent rallies. Check for example TSSI, a 29$ AI data centre leader recently trading at 30 cents, which rallied over 400% since April 7th, after crashing 70% in the 2 months before that.
Despite a plethora of breakout failures, and though most better stocks such as PLTR, VRNA or SFM behave sluggish and reluctant, there remains a constant bid under the FOMO names, wedging prices up to astronomic levels without pulling back.
While the top-weights of the popular large-cap indices keep bending the indices (MSFT just pulled a 100th percentile (!) move based on data of the previous 20 years, rallying 42.7% in 53 sessions), small-, mid- and microcap averages show a less rosy and lagging picture. The latter are still far from their old Highs, while Nasdaq and SP500 are within 1-2%. But even within the Magnificent 7, there is a split – AAPL, TSLA and GOOG (now technically out of the Mag7) are severely lagging behind the mighty AI names MSFT, NVDA and AVGO. The popular averages are becoming even more lopsided than they were in the 2024 and early 2025 rallies.
Of course, one could argue that the spike in the VIX to 60$ in April has led to a lot of de-risking in institutional portfolios and thus renewed firepower to pour into blue-chip tech and AI names, and that might be exactly what is happening. Caution is thrown in the wind, markets climb a wall of worry, and any news is good news.
Split, split, split, and mixed signals everywhere. As Gerald Loeb said, ‘when in doubt, stay out’.
Don’t get me wrong though. While the US markets retain their risky character, this can go on for a long time, as it already has. Bond market volatility has equally taken a break for now (still in their year-long bear market), and while the VIX is back in complacency territory, sentiment ratios remain muted. Once multiple important benchmarks confirm a move back into new Highs, I see no reason for this rally to end soon, unless something radical happens. A delight for passive holders who are nearing a “golden cross” on the SP500, and speculative traders whose “strategies” are in favor … but just prolonged boredom for the rest.
So long,
TGS
