Chart of the Week: The S&P 500 year-long round-trip

Despite a year defined by disruption — a contested US election, the rise of DeepSeek and the resulting disruption to the market leadership of the Magnificent Seven, and escalating trade tensions crystallised by the so-called Liberation Day tariff announcements — the S&P 500 stands roughly 10% higher than it did a year ago. US stocks did well following Trump’s election victory, amid hopes over tax cuts and more expansionary fiscal policy but pared those gains on rhetoric and early moves on trade and tariffs of the new US administration. This has culminated in broad-based risk-off behaviour following the announcement of aggressive and broad tariffs. While the subsequent suspension of some of these measures restored a measure of stability, it has not translated into a meaningful revival of investor optimism. On a relative basis, the S&P 500 is performing similarly to long-duration US Treasuries, marking a sizeable reallocation towards perceived safety within US asset classes. The S&P 500 is now outperforming global equities, underscoring the asymmetric impact of US-centred shocks on less diversified and more externally vulnerable markets. The one consistent outperformer has been gold, whose strength appears to reflect not only inflation hedging but a structural bid for protection against deepening geopolitical and policy uncertainty. That the S&P 500 has seemingly done a year-long round-trip, despite pronounced swings in both sentiment and macro signals, points to a market that remains liquid and resilient, yet ultimately unsure of the policies of the new US administration, or their impact.

Refresh this chart in your browser | Edit the chart in Datastream

The views expressed in this article are the views of the author, not necessarily those of LSEG.

______________________________________________________________________________________