Markets have enjoyed a notable rebound in recent weeks, and according to the Sevens Report, this renewed optimism is being driven by three primary factors — even as some experts remain wary of the rally’s durability.
Just a month earlier, the dominant narrative was one of stagflation fears and talk of a “lost decade” for equities. But sentiment has shifted sharply.
“In the last month alone, the S&P 500 has jumped nearly 10%, the VIX has fallen from 30 to 18, and market sentiment has turned more optimistic,” the Sevens Report observed.
1. Tariff Certainty and Limited Economic Impact
One major factor cited is growing investor comfort with the newly imposed 10% global tariff regime. The report suggests that while certain prices have risen — like a 40% spike in Barbie doll costs at Target — the overall economic impact appears contained. Sevens believes the burden is being shared across the supply chain, keeping the hit to consumers minimal. “Tariffs at 10% aren’t enough to derail the economy,” they concluded.
2. Lower Inflation May Pave the Way for Rate Cuts
Sevens also points out that inflation could remain in check, even with the new tariffs. Falling housing and energy prices might offset cost increases elsewhere, helping keep CPI and Core PCE inflation levels moderate. “Once that becomes clear, the Fed could respond with rate cuts — a move that would support further gains in the stock market,” the report stated.
3. Valuation Concerns May Be Overstated
Lastly, the report notes that while the S&P 500 currently trades at a seemingly expensive 22.2 times projected 2025 earnings, switching to 2026 estimates lowers that multiple to 20.3. Sevens argues that multiple could even expand to 21.3, implying additional room for upside.
However, the firm tempers its enthusiasm with a word of caution: “There’s validity to the bullish view, and those following it aren’t irrational,” they said. “But they are being aggressive — and at these levels, we still see chasing stocks as a poor risk/reward bet, despite the short-term momentum.”
