July 23, 2025

QuickTakes

Slow-Motion Meltup Continues

The S&P 500 and Nasdaq edged up to record high closes today, lifted by Nvidia and GE Vernova. Trump's Tariff Turmoil appears to be subsiding, just as we expected it would during the summer. Investors are welcoming President Donald Trump's recent tariff deals and expect more before the August 1 deadline set by the President. The European Union and the US appear headed toward a trade deal similar to an agreement President Donald Trump struck with Japan. The White House's deal with the EU would include a broad tariff of 15% on EU goods imported into the US. The rate, which could also extend to cars, would mirror the framework agreement the US has struck with Japan.

Leading the S&P 500 higher since mid-2023 have been momentum stocks (chart).

The outperforming momentum stocks have been mostly those classified by S&P as Growth stocks (chart). The latter have outperformed Value stocks since the start of the Great Financial Crisis.

As Growth stocks outperformed Value stocks, the forward P/E of the S&P 500 has been boosted because the former usually has a higher forward P/E than the latter (chart). This development has been accentuated by the increasing market cap share of Growth relative to Value.

Also underperforming the S&P 500 have been the S&P 400 MidCaps and S&P 600 SmallCaps (chart).

The underperformance of SMidCaps relative to the S&P 500 LargeCaps is mainly attributable to the flatlining forward earnings of the former since early 2022, while the latter has remained on an uptrend and has been rising to record highs since late 2023 (chart).

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