#MarketRebound

### 📈 **Comprehensive Analysis of the Current Market Rebound**

#### 🚀 **1. Key Drivers of the Rebound**

- **Trade Tensions Easing**: Markets surged in May 2025 due to a 90-day U.S.-China tariff de-escalation (effective May 14), which temporarily rolled back tariffs by 115% from recent peaks . Renewed negotiations in June fueled optimism, with U.S. Commerce Secretary Howard Lutnick noting talks were "going really, really well" .

- **Strong Corporate Earnings**: Q1 2025 earnings grew 13.3% YoY, led by the "Magnificent Seven" (27.7% growth). Tech (+10.3%), communication services (+9.6%), and consumer cyclical (+8.9%) were top performers . AI-driven demand boosted firms like **Constellation Energy** (+10%) and **AMD** (data center sales up 57%) .

- **Technical Breakthroughs**: The S&P 500 reclaimed 6,000 (a key psychological level), while the Nasdaq surged 9.7% in May—its best month in two years. This reversed a 3-month losing streak .

#### ⚠️ **2. Lingering Risks and Volatility Catalysts**

- **Inflation and Tariff Impacts**: May’s CPI (due June 11) is expected to show core inflation rising to 2.9% YoY, partly due to tariffs. Analysts warn sustained inflation could erode consumer spending .

- **Geopolitical Uncertainty**: Trade talks remain fragile, with deadlines looming (July 9 for tariff extensions, July 4 for U.S. budget). Leaks or breakdowns could trigger volatility .

- **Yield Sensitivity**: Treasury yields near 5% (e.g., 10-year at 4.45%) threaten equity valuations. Weak bond auctions or Fed hawkishness could spark selloffs .

#### 💰 **3. Market Valuations and Positioning**

- **Overextended Large Caps**: The S&P 500 trades at a 21x forward P/E ratio, close to fair value (only a 3% discount) . Growth stocks trade at an 11% premium, while value stocks remain discounted (14% discount) .

- **Small-Cap Opportunity**: Russell 2000 trades at a 20% discount but requires patience. Historically, small caps thrive when the Fed eases policy—unlikely before September .

- **Sector Disparities**: