76report

May 28, 2025

Optimism Is Back… and For Good Reason

As anyone who follows me knows, I am extremely excited about many of the changes underway across American society ever since the November election.

We are focusing again on the foundations of American success… concepts like merit, hard work, opportunity, talent, and faith in our ability to improve.

From an economic and market perspective, this means getting away from the redistribution schemes and big government programs of the Biden years.

The focus now is on growth and private enterprise.

This first year of the second Trump administration has not been completely smooth sailing, of course. For investors, early April was a very challenging period.

Trump made the decision back in April to start the negotiation process with America’s trading partners in a rather aggressive fashion. Tariffs were initially set at very high levels.

Markets basically freaked out. Stocks declined sharply after Liberation Day. The bond market wobbled as well.

But within a week, the pause was announced. Markets regained confidence that Trump was not interested in breaking the global economy.

If it bleeds, it leads

One thing I’ve learned in my many years as a business journalist—what the financial media loves more than anything else is a good old-fashioned market panic.

But there was more to it this time than the usual fear-mongering.

The big media organizations that dominate financial news are generally not staffed with people who align with President Trump.

There was an ideological element to all the doom and gloom we witnessed in April. This could have been just as impactful as the commercial agenda.

Fortunately, markets have a way of seeing past this kind of spin.

This reminds me of the election itself. Polls and pundits were painting a picture of a complete toss-up.

Meanwhile, prediction markets like Polymarket, where really money was on the line, were leaning heavily in Trump’s direction.

Of course, the prediction markets were right about the election. Trump won decisively.

Financial market indicators now appear to be leaning in Trump’s direction, too.

Total recovery

As we write today, the outlook is quite different versus where we were in early April. The S&P 500 Index is now slightly up on a year to date basis.

If in addition to stocks, your portfolio has had allocations to gold and Bitcoin (as we have urged 76research subscribers to consider), it may now be at its highest levels of the year.

Gold and Bitcoin are respectively up more than 25% and 15% so far this year.

S&P 500, Gold, Bitcoin

(Total Return - Year to Date)

Mom and pop are buying stocks

Much of the selling in early April seems to have been driven by institutions, hedge funds, and foreigners. American households were often on the other side of these trades.

On May 25, The Wall Street Journal published an article describing record setting flows into Exchange Traded Funds (ETFs) this year.

Investors have plowed a record $437 billion into U.S. ETFs so far this year, unfazed by the wildest markets since Covid. And if inflows maintain the current pace—historically, they accelerate in the summer and fall months—it will mark the second straight record year for U.S. ETF flows. - The Wall Street Journal (5/25/2025)

Retail investors who bought the S&P 500 Index when it was at its lowest levels in April have been rewarded for going against the grain (as investors in the stock market so often are).

On April 7, we told 76report subscribers that “we continue to view a severe valuation adjustment like this as a buying opportunity.” The S&P 500 is now up nearly 20% since it bottomed the following day on April 8.

Trish Regan Discusses Renewed Market Optimism

It’s not just investors

Just as the stock market has essentially fully recovered from the “tariff tantrum,” we are now getting evidence that the consumer is in solid shape too.

A few weeks ago, we told our readers that Visa (V), the leading credit card platform, stated on its earnings conference call that they were seeing no deterioration in consumer spending through the end of April.

This was an important data point. If anyone has real-time information on what consumers are doing, it’s Visa.

Yesterday, we got additional evidence when the Conference Board released its latest consumer confidence survey results.

The widely followed Consumer Confidence Index is published on the last Tuesday of every month. This index rose 12.3 points in May, from 85.7 to 98.0.

More impressively, the Expectations Index, which measures consumer expectations about the near-term trajectory of the economy, rose 17.4 points, from 55.4 to 72.8.

An important footnote here is that half the responses were collected after Trump’s May 12 pause on tariffs with China—suggesting the survey results could actually understate confidence levels.

Consumer confidence improved in May after five consecutive months of decline. The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards. The monthly improvement was largely driven by consumer expectations as all three components of the Expectations Index—business conditions, employment prospects, and future income—rose from their April lows. - Stephanie Guichard, Senior Economist, The Conference Board (5/27/2025)

Investors, consumers… and voters

Trump’s political opponents may have been hoping tariff mayhem would bring him down. A recently released county-by-county analysis of the 2024 election results suggests this will be an uphill battle.

The study was conducted by none other than the The New York Times (which should put to bed any concerns of pro-Republican bias).

The analysis found “six times as many counties moving toward the G.O.P. than toward the Democratic Party — and by a substantially wider margin.”

The biggest gains for Trump took place in counties where the median household income was below $80,000, which is approximately the median household income of the United States.

Of the counties in which Republicans gained votes in the 2024 Presidential election, about 95% had median incomes below $80,000. For Democrats, only 25% of the counties where they gained ground had incomes below that level.

Democrats did manage to perform better in a relatively small number of highly affluent, high income counties. But if markets continue to deliver, Republicans may even start to eat into that support base as well.

Staying focused on what matters

It is reasonable to expect more tariff drama as Trump looks to reduce persistent trade deficits and bring more industrial activity onshore—for economic as well as national security reasons.

Last week, we saw markets under some pressure as Trump talked about 50% tariffs on the EU—only to see a big relief rally this week when the tariff deadline was extended.

Investors who are overly focused on the tariff back and forth are at risk of missing what could be the most compelling reason to be invested in U.S. stocks at this point—the technological revolution that is underway thanks to rapid advances in AI.

The negative perception of America that dominated headlines in early April was one of a country that seeks to cut ties with the rest of the world.

This perception is quite different from the reality that was presented to the world during Trump’s recent trip to Saudi Arabia.

Trump secured a $600 billion investment commitment from Saudi Arabia. This includes $20 billion from Saudi tech company DataVolt to build AI data centers and related infrastructure in the U.S.

The administration also negotiated multi-billion dollar deals to help Saudi Arabia build up its own AI capabilities. These deals will directly benefit American companies like NVIDIA (NVDA), Oracle (ORCL), AMD (AMD), Amazon (AMZN) and Alphabet (GOOGL).

Very importantly, these agreements effectively freeze out Chinese competitors like Huawei. This in itself is a major victory.

AI is in its infancy. The Saudis will be standardizing around American—not Chinese—technology.

A new approach

Trump’s actions are often misinterpreted by his many critics, who are quick to attribute bad motives.

Trump is not disengaging from the world. He is rather engaging with the world in a different way—with the ultimate goal of fixing long-term problems and protecting America’s long-term interests.

Meanwhile, U.S. companies are leading the way in technological innovations that are genuinely transforming the global economy.

AI has the potential to usher in a productivity boom that could generate enormous wealth. This should benefit society as a whole and especially those who are directly invested in it.

Identifying the stocks that will win in this rapidly shifting landscape is our top priority at 76research and drives our Model Portfolio selections.

April’s volatility was disconcerting, to be sure. But American investors and consumers alike seem to be putting the storm behind them and redirecting their attention to some very good things on the horizon.

I’m a realist. As such, I’ll call balls and strikes. But I’m not betting against the United States.

We ARE… and will continue to be… THE driver of global capital markets, innovation and entrepreneurism. The pace of change may be accelerating, but the U.S. WILL REMAIN the envy of the world.

Much more to come. Make sure you are part of it.

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