This week's stock market rally could well go down in Wall Street history as one of the most epic on record. The S&P 500 is up by more than 20% in the 36 days since it hit a 15-month low on April 7. The index took just 16 days to hit the 20%-recovery-from-the-lows mark in 2020 and 18 days in 2009. The difference this time around is there is no tidal wave of monetary or fiscal stimulus helping to grease the wheels of the rally. The bulls aren't just back, they're in the driving seat and the Magnificent 7 - Apple, Amazon, Microsoft, Nvidia, Meta and Tesla - are the engine.
Investors have an affinity for shiny things. This week's cocktail of market-friendly catalysts, including the 90-day halt to the U.S./China trade war, a benign reading of inflation and a raft of headline-grabbing investment deals from the Middle East, where Trump happens to be visiting, have set the stage for Mag 7 mania once again.
Nvidia has announced it will sell hundreds of thousands of its artificial intelligence chips in Saudi Arabia. Chip designer Advanced Micro Devices has unveiled a $10 billion collaboration with Humain, the Saudi sovereign wealth fund's newly minted AI startup, while the Saudi government itself made a commitment to Trump to invest $600 billion in U.S. companies.
If the Mag 7 were a major drag on the broader S&P on the way down earlier this year, they're proving to be a major boon on the way back up. Most world indices have recovered the bulk of the losses triggered by the April 2 "Liberation Day" sell-off. Since then, the Roundhill Magnificent 7 exchange-traded fund has gained 11%, far outpacing the 4.5% rise in the S&P 500 since then. By contrast, the equal-weight S&P, which strips out the oversized influence of the megacaps, is barely up 1%.
Tesla has rejoined the $1-trillion club this week, having dropped out in late February, while shares in Nvidia, whose name has become synonymous with the AI boom, have gained nearly 18%.
