Latest news with #SevensReport
Yahoo
29-05-2025
- Business
- Yahoo
Why the 'TACO Trade' still matters for your portfolio
-- Over the past 48 hours, the term 'TACO Trade' has been widely circulated on social media and even made it to the White House. TACO is an acronym for 'Trump Always Chickens Out', which suggests that despite his tough talk on tariffs, he will always back down in the end. Trump was asked about the TACO trade on Wednesday, enraging the President. '… don't ever say – what you said, that's a nasty question,' Trump slapped back when asked about it. Commenting on the TACO Trade and if the President always chickens, analysts at Sevens Report stated Wednesday, '[s]o far, yes (at least compared to his tariff threats).' They highlight that Trump reduced the impact of tariffs by exempting USMCA goods from Mexico/Canada duties, delaying reciprocal tariffs a week after the 'Liberation Day' announcement, cutting steep China tariffs weeks after implementation, and postponing a 50% EU tariff threat until July 9—the end date for other reciprocal tariff exemptions. Has the TACO trade worked? According to Sevens Report, 'yes.' The analysts note that the TACO trade thesis is simple: buy the Trump tariff dip. Trump's history shows he rarely follows through on extreme tariff threats, so market sell-offs tend to reverse. The S&P 500 rose 2% after the March 4 tariffs on Canada, Mexico, and China. It's up nearly 10% from the April 2 'Liberation Day' dip, and 11% since the April 11 announcement of 145% China tariffs. The index is now higher than before Friday's 50% EU tariff threat. In short, buying during tariff scares has paid off. Will the TACO trade keep working? 'Probably,' according to Sevens. Tariff-related dips may be shallower now as more investors buy them, so caution is warranted. Still, history shows Trump rarely enforces extreme tariffs, they're likely just part of a negotiation tactic: make bold threats to secure moderate outcomes. And so far, that strategy has worked. Sevens added that TACO trade doesn't eliminate tariff or trade war concerns. While Trump often backs off extreme threats, tariffs have still increased significantly, they highlight with 10% on all U.S. partners, 35% on China, and 25% on steel and non-USMCA goods from Canada and Mexico (10% on energy). While these aren't as severe as first proposed, but they're far higher than pre-Trump levels, and their economic impact remains uncertain. The TACO trade's success doesn't mean the risks aren't real. So, while the TACO trade has worked and may keep working short-term, it doesn't change the fact that tariffs are at multi-decade highs. Regarding how investors should approach the TACO trade, they suggest a short-term strategy of buying consumer discretionary (XLY), tech (XLK), financials (XLF), industrials (XLI), and energy (XLE (NYSE:XLE)) after major Trump tariff threats. These sectors fall hardest but rebound strongest. Scale in over a day or two after the sell-off. Meanwhile, for the long term they said, 'Ignore TACO.' The next 15–20% move in the market will hinge on the economy's resilience to tariffs, policy volatility, high rates, no Fed cuts, and weaker consumer spending. Trump's threats may shake sentiment, but unless enforced, they're not long-term drivers. Still, with tariff burdens rising, it's wise to stay long but reduce volatility exposure. So, while the TACO trade received a reprieve today after a federal court struck down President Trump's tariffs as illegal and beyond his authority, the Trump administration has stated it will appeal the ruling. Many on Wall Street expected it to be overturned. Related articles Why the 'TACO Trade' still matters for your portfolio Paramount cut to Neutral at Citi Boeing stock climbs on production ramp-up plans Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
20-05-2025
- Business
- Yahoo
What the Moody's downgrade means for markets
-- Moody's downgraded U.S. sovereign debt late Friday, prompting a wave of headlines and a weak market open on Monday. However, according to the latest Sevens Report, the move is unlikely to drive long-term market direction. 'Moody's downgraded U.S. sovereign debt to Aa1 from Aaa. That downgrade boosted long-term Treasury yields, as some investors sold long-term Treasuries,' the analysts wrote. Stocks opened lower Monday, but Sevens emphasized that the downgrade 'revealed nothing new.' Moody's cited two familiar concerns. Sevens explained that first, there is 'a lack of progress from numerous past Congresses and administrations to address rising fiscal deficits,' and secondly, there is 'growing interest costs as a percentage of GDP.' But Sevens called the timing questionable: 'Downgrading U.S. debt for larger deficits and rising interest costs is the financial equivalent to saying 'water is wet.'' The downgrade follows similar moves from S&P in 2011 and Fitch in 2023. Sevens said, 'There's been no dramatic deterioration lately,' and noted that speculative fears tied to potential legislation 'don't justify the downgrade.' While the downgrade may pressure stocks briefly, Sevens sees little long-term impact. 'The deteriorating fiscal situation hasn't stopped stocks from rallying over the past few years and that's unlikely to change anytime soon.' The firm believes rising Treasury yields could weigh on equities, but 'they will rise mainly because of growth and inflation expectations, not in reaction to Moody's downgrade.' Sevens said markets will be driven instead by '1) Tariff policy (more tariff reduction), 2) Economic growth (can the U.S. avoid a slowdown) and 3) Fed policy (will they cut rates in the next few months?).' As for the broader fiscal picture, 'The U.S. fiscal trajectory is unsustainable in perpetuity,' Sevens warned — but added, 'It's just not something that should cause you not to be in the market for the foreseeable future.' Related articles What the Moody's downgrade means for markets Evercore upgrades HPE to Outperform on attractive risk-reward profile MongoDB downgraded as AI tailwinds are likely slower than expected Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15-05-2025
- Business
- Yahoo
Here are 3 key reasons why markets are rallying
-- Markets have staged a strong rally in recent weeks, and according to the Sevens Report, there are three core drivers behind the shift in sentiment, even as some analysts remain skeptical about the sustainability of the surge. Just a month ago, the market outlook was dominated by fears of stagflation and concerns of a 'lost decade' for stocks, but that narrative has flipped. 'In the past month, the S&P 500 has surged basically 10%, the VIX has dropped from 30 to 18 and sentiment indicators have swung more bullish,' Sevens wrote. Reason 1: Sevens highlighted tariff clarity and limited economic damage. The firm said investors increasingly view the new 10% global tariff regime as manageable. 'Tariff levels aren't enough to derail the economy,' Sevens said. Despite isolated price increases, like a 40% jump in the price of a Barbie at Target, Sevens notes that 'if tariffs rates are 10%,' and cost absorption is split among supply chain players, the consumer burden remains limited. Reason 2: Inflation may stay low, opening the door to rate cuts, according to the firm. Sevens argues that price increases from tariffs could be offset by falling housing and energy costs, potentially keeping CPI and Core PCE inflation measures contained. 'Once that's obvious, [the Fed will] cut rates and further support stocks,' wrote the firm. Reason 3: Valuations may not be as stretched as they appear. Finally, Sevens explained that while 2025 S&P 500 earnings suggest a pricey 22.2X multiple, switching to 2026 estimates brings it down to 20.3X. That 'can be increased at least a 'turn' to 21.3X,' implying further upside, stated Sevens. Despite the positives, the firm cautions against excessive optimism. 'The bullish argument has merit and for those that want to follow it, I don't think they're fools,' they wrote. 'However, I do think they're aggressive right now and as such, I continue to think that while short-term momentum is bullish, chasing stocks here remains an unattractive risk/reward proposition.' Related articles Here are 3 key reasons why markets are rallying JPMorgan flags signs of fatigue among retail investors Petrobras upgraded to Buy at Jefferies as cost-cutting improves risk-reward Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Mint
06-05-2025
- Business
- Mint
The silver rally has lagged gold's run. That could change soon.
Gold prices have been on a tear, leaving silver far behind. As the gold rally slows, it could be silver's chance to shine. It's been a great time for gold investors. A slew of factors, including inflation worries, demand from central banks, and uncertainty surrounding the Trump administration's trade war have combined to send the metal up 23% so far this year to nearly $3,232 an ounce, for near-month contracts on Comex, according to Dow Jones Markets Data. Silver, also historically as a safe haven whose price tends to track that of gold, has rallied too, but nearly dramatically. Silver prices have gained about 10% this year to just under $2 an ounce. The difference has investors talking. Gold's big rally means its now trading roughly 100 times the price of silver, a premium it has achieved only a handful of times in the past, most recently in March 2020, the early days of the Covid pandemic. More typically gold trades in a range of 40 to 60 times the price of silver, according to Tom Essaye, author of the Sevens Report, a markets newsletter. That means silver has room to catch up. 'If history is a guide, the next phase of the precious-metals rally could belong to silver, not gold," he wrote last month. Market dynamics may be shifting in silver's favor. Gold was a big beneficiary of uncertainty surrounding the Trump administration's trade war launched on April 2, dubbed 'Liberation Day." In the past few weeks President Donald Trump has walked back some proposals, while investors have had time to digest the news. Last week, the S&P 500, which recently completed a nine-day win streak, mostly recouped its post-April 2 losses. That's led investors to sell gold, which has declined about 2.3% in the past two weeks. Silver, meanwhile, has a wider range of industrial uses than gold. These could turn into price catalysts in coming months. There is a hitch to this thesis—many economists see growth slowing. During the first three months of 2025, the U.S. experienced its first quarter of negative GDP growth since 2022. But any potential weakness is already baked into silver's price, giving the metal plenty of potential room to rally, according to Ned Davis Research. 'On April 7, the NDR Crowd Sentiment Poll for Silver dropped to its lowest level in nearly a decade," wrote NDR commodity strategist Matt Bauer last month. 'Extreme pessimism coincided with rising concerns over global growth following announcements of prohibitively high tariffs. Sentiment has since started to rebound though it has not yet cleared the neutral hurdle. A return to neutral would open the door to additional advances." Long-term demand for silver, a key ingredient in solar panels and other clean-energy gear, remains strong too, argues asset manager WisdomTree. That's thanks in large part to China's push toward renewable energy. Last month China said its wind and solar energy capacity exceeded its thermal capacity, which is mostly from coal, for the first time. 'Despite overall industrial weakness, silver-specific demand is expected to remain resilient," wrote Nitesh Shah, head of commodities and macroeconomic research at WisdomTree Europe, last month. 'This is largely due to strong photovoltaic demand, as China intensifies its energy transition efforts to stimulate domestic growth." Write to Ian Salisbury at
