Is the worst behind us? As the S&P 500 surged to a three-week high amid easing tariff threats from Donald Trump, banks and investment firms rushed to the bulls' side, jostling for position. According to JP Morgan and Evercore, the worst stock sell-off of 2025 is over, and Bank of America sees signs of capital flows reversing. Previously, money was flowing from North America to Europe—now, it's time for a reversal.

Necessity is the mother of invention. While it's hard to call Donald Trump a poor man, one can certainly admire the Republican's inventiveness. He introduced a new concept in trade wars by announcing a 25% tariff on anyone purchasing oil from Venezuela. This approach could later be applied against Russia if it continues to stall on ending the armed conflict in Ukraine.

However, what energized markets wasn't this new "weapon." What mattered more for the S&P 500 was the White House's decision not to impose tariffs on imports of cars, semiconductors, and pharmaceuticals starting April 2. Additionally, any mutual tariffs will be selective in nature. If that's the case, the chances of a U.S. recession will decline, and capital will begin to return to the U.S.

S&P 500 and the Magnificent Seven Stocks Performance

According to Bank of America, the main reason for the capital flight to Europe was the sell-off in the "Magnificent Seven" stocks, which dropped by 14%. As a result, Tesla and other tech giants shed a significant portion of their gains and are now beginning to look attractive again. Their valuation relative to the broader market has dropped to its lowest level since late 2022. Is it time to buy?

JP Morgan believes so, pointing to seasonal factors, the decline of the U.S. dollar and Treasury yields, as well as deeply pessimistic sentiment among retail investors—all of which pave the way for an S&P 500 rally. Evercore notes that this negative sentiment stems from White House actions, as tariff threats fueled recession fears.

A U.S. economic downturn could have become a self-fulfilling prophecy. Historically, whenever media interest in the topic surged, a recession wasn't far behind. On average, a recession occurred around seven months after peak user search activity. This means U.S. GDP could have risked contracting by October if the White House had continued to frighten markets with tariff threats.

Corporate Earnings Forecast Dynamics

The S&P 500 has its own kind of safety cushion—a weak U.S. dollar. Roughly 30% of companies in the index generate revenue from overseas, and a declining USD index supports their financial performance. In fact, it was the revision of earnings forecasts that catalyzed the capital shift from North America to Europe. Is it time to return home?

On the S&P 500's daily chart, the bulls have launched a counterattack. However, a rejection at resistance levels of 5815, 5835, or 5885 would be a signal to sell.