Stocks Move Higher As Trump Backs Down from Threats to China
The stock market is dominated by the Magnificent Seven tech stocks and will likely continue to be so for the rest of the year.
Quick overview
- The stock market saw significant gains on Monday, with all three major indices rising over 1%.
- Diminished tensions between the U.S. and China, following President Trump's tariff adjustments, contributed to the market's positive performance.
- The tech stocks known as the Magnificent Seven are expected to outperform the market, but concerns about potential overvaluation and a market bubble are rising.
- These seven stocks now account for over a third of the S&P 500's value, raising questions about the sustainability of their growth.
The stock market climbed by the end of day Monday with all three major indices adding more than 1% to their elevated numbers.
With President Donald Trump walking back some of the tariff threats he made to China and its leader Xi Jinping, tensions between the two countries have lessened. That led to an uptick in stock market prices on Monday and could create a bullish market for Tuesday as well.
The Dow Jones added 1.12% on Monday as trading ended, an increase of more than 500 points. The Nasdaq Composite rose by 1.37%, and the S&P 500 gained 1.07% in a very positive day of trading.
Earnings for Magnificent Seven Expected to Soar
Over the next year, the tech stocks known as the Magnificent Seven are anticipated to grow much faster than other stocks and outperform the market. These include Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), and Nvidia (NVDA) among others.
These have been some of the best performing stocks all year, and they should grow even higher in 2026, but does that create a situation where these stocks are overvalued? It could, and some analysts are warning that the bubble is forming and could pop in the near future. With several key stocks dominating, that part of the market may be growing too fast and too high, and it could all come crashing down.
The problem is that these companies are already valued so high on the S&P 500 and have the potential to climb much higher. We have not seen that happen with the stock market before- where a few elevated stocks continue to grow exponentially. There is concern that their growth will cause a market bubble to burst and investors need to be aware of that risk.
These seven stocks now make up more than a third of all of the S&P 500’s value, and they could grow to swallow up more of it. The market is bullish now across multiple stock indices, and it appears that this week could see tremendous stock growth thanks to diminishing tensions between China and the United States, strong banking earnings statements from last week, and the already elevated state of the stock market.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save