S&P 500 Could Drive Buys After Trump Spooks Market With Apple Tariff Threat
Trump’s latest market headwinds bring reasons to stay on the sidelines for now but could present a buying opportunity.
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On Thursday, it was expected the U.S. and European Union (EU) were heading into trade talks, but on Friday morning, President Trump commented those trade discussions “are going nowhere” and he’s “recommending a straight 50% tariff on the European Union (EU), starting on June 1, 2025.”
Let’s remember, the EU was readying some $108 billion in retaliatory tariffs if those talks failed. We have several days until Trump’s June 1 deadline, which means a deal still could be struck in time. However, these trade developments as well as Trump threatening Apple AAPL with a tariff of 25% if it does not manufacture its iPhones in the U.S., combined with the market being intermediate-term overbought, looks to add to the market’s decline this week.
On Tuesday morning, we locked in some nice gains for the Portfolio, upping our cash position in the process and moving to the sidelines given the market’s emerging technical setup. As we shared in Thursday’s video, we recognized a few headwinds for the market, and Friday morning’s Trump-related developments and the fresh uncertainty they bring only add to them. They also add to our concern about consensus EPS expectations for the S&P 500 in 2H 2025 and what that could mean for the market multiple. Even after the move lower so far this week, with Thursday night’s close the S&P 500’s P/E multiple on current 2025 consensus EPS was 22x.
Our plan is to do what we do: follow the data and position the Portfolio accordingly given our medium- to long-term time horizon. Next week brings another rash of retailers, but as we discussed with Jay Woods in this week’s "Stocks & Markets" podcast, we also have quarterly results from Nvidia NVDA, Salesforce CRM, Elastic ESTC, Marvell MRVL and Costco COST. We have more Fed speakers, the Fed’s latest FOMC meeting minutes, and multiple investor conferences as well.
It will be a lot to chew through in what is a compressed week for the market given the Memorial Day holiday that will have U.S. equity markets closed. Perhaps the long weekend will bring calmer minds and trade conversation, but if it doesn’t there is reason to think we will see another round of conservative guidance and comments as companies report, discuss the current quarter and update expectations for 2H 2025.
With that in mind, as you can see in the chart below, we see support for the S&P 500 between 5,768 and 5,770. However, we also see a gap below that near 5,700. That’s about 2.5% or so lower than the S&P 500 closed on Thursday night, and while fun, we have to remember that pullbacks of 4% to 5% tend to happen a few times each year on average. The midpoint of that 4% to 5% range from the S&P 500’s recent high of 5,968.91 on May 19 is about 5,700.
With those levels in mind, we’ll look to revisit our shopping list as well as one or two potential new candidates for the Portfolio as some of the froth we’ve been talking about comes out of the market.
At the time of publication, TheStreet Pro Portfolio was long AAPL, NVDA, ESTC, MRVL and COST.
