Real-Time BNB Signal Analytics
Real-Time BNB Signal Analytics
One year into President Trump's second term, and the stock market is singing a happy tune. The S&P 500 is up nearly 20% (19.6%, to be precise) over the last year. Trump, predictably, is taking credit, pointing to record highs as proof he's "doing something right." But let's dig into the numbers, shall we?
The market's rise isn't a broad-based phenomenon; it's being driven by a handful of tech giants riding the AI wave. Nvidia (NVDA), for instance, now accounts for 8% of the S&P 500’s market value after hitting $5 trillion. That’s a huge concentration of risk. An equal-weighted version of the S&P, giving every company the same importance, is up a comparatively paltry 6%. A discrepancy that begs the question: Is this a healthy market, or a top-heavy gamble on a single sector?
The tariff turmoil earlier this year offers another interesting data point. The S&P 500 tanked nearly 20% in April when Trump floated his tariff plan. The market recovered when the administration walked back the most extreme measures. One could argue that the market's current position is less about Trump's brilliance and more about relief that he didn't fully follow through on his initial threats.
Speaking of global comparisons, the US market's performance looks less impressive. South Korea's Kospi index has soared 66% in the same period. Hong Kong's Hang Seng is up 28%. Poland and Greece? Up 52% and 60%, respectively. So, while Trump is touting record highs, other markets are leaving us in the dust. Is this "America First," or just "America also-ran"?
Even the bond market is flashing mixed signals. Despite rising deficits and Trump's pressure on the Fed, Treasury yields have fallen (the 10-year is down from 4.4% to 4.1%). Investors are still piling into US government bonds. What does this mean? Are they seeking safety amidst the AI hype, or are they betting that the Fed will eventually cave to political pressure and lower rates?
Wall Street's "fear gauge," the CBOE Volatility Index, is signaling calm. But is it justified? As Truist's Keith Lerner points out, the market hasn't had a significant pullback since April. That makes it vulnerable to negative surprises. What if the AI bubble bursts? What if corporate earnings falter? What if Trump decides to ramp up trade wars again? A low volatility index can breed complacency, and complacency is a dangerous thing in the market.
"Ultimately you zoom back and you say, 'All right, it's an AI bull market,'" says Baird's Ross Mayfield. "The administration took the baton from the last administration only two years into a bull market, still with a lot of leg room left and companies growing their earnings."
I've looked at hundreds of these types of reports, and that quote is just too convenient. Sure, the AI boom is real. But crediting the administration for simply riding that wave seems overly generous. It's like praising a surfer for catching a wave they didn't create.
Goldman Sachs CEO David Solomon expects a 10% to 20% drawdown in the next year or two. He thinks, "Things run and they pull back so people can reassess." I would tend to agree with that statement, given the data at hand. Stock market today: Dow, S&P 500, Nasdaq slide as tech hit on AI valuation fears, bitcoin dips below $100K
The market's gains are concentrated in a few tech stocks, driven by AI hype. Global markets are outperforming the US. Volatility is low, but the risk of a correction is high. The administration is taking credit for a rally that's largely due to factors outside its control.
This isn't a Trump rally; it's an AI-fueled gamble. And those are two very different things.
