The “Don’t Fight Trump” Trade Is Working: S&P 500 Ignores Everything and Keeps Surging

The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) keeps rising more and more, no matter how “bad” the news gets. Since Election Day 2024, the index is up 30%, a run that has absorbed a shooting war with Iran, a tariff regime that rewrites itself by tweet, and an inflation print that refuses to behave. The bumper sticker version, popular on trading desks from Greenwich to Greenwich Avenue, is “don’t fight Trump.” The honest version is more interesting. The market has decided that none of the things keeping cable news producers employed actually matter to corporate earnings, and so far the market has been right.

What the tape is actually pricing

A roughly 30% move in 18 months on a $50-plus trillion index ranks, in dollar terms, as one of the largest wealth creation events in American history, and it has happened while the Consumer Price Index climbed from 315.493 in November 2024 to 333.020 in April 2026. Inflation has stayed elevated while equities outran it. Equities, being claims on nominal cash flows, do fine when prices rise, so long as corporate margins hold. And margins have held.

Money market balances remain parked near record highs, the Treasury has been terming out debt at a measured pace, and the AI capital expenditure cycle has pulled forward something like a trillion dollars of data center, power, and chip spending into a two-year window.

That spending lands on the income statements of a small number of very large companies, which is why the index keeps grinding higher even when the median stock does not. The breadth problem is real, but it has been real for the entire move, and shorting narrow leadership has historically been a fast way to lose money in a bull market driven by genuine earnings growth at the top of the index.

The disclosure that nobody wants to talk about

President Trump’s Q1 2026 financial disclosures revealed hundreds of millions of dollars in personal stock holdings concentrated in crypto, artificial intelligence, and defense, which happen to be the three sectors most exposed to the administration’s policy agenda. You can read this as a conflict of interest, or as the cleanest possible signal of what policy is going to favor. The market, characteristically, has chosen to read it as a signal. Traders front-run the policy, the policy validates the trade, and the feedback loop keeps the bid under energy, defense, and domestic manufacturing names regardless of what the macro data looks like in any given week.

Tariffs are the test case. Every time the White House escalates, equities wobble for a session and then recover, because traders have learned that the announcement marks the ceiling for the drawdown. The Guardian last week called this the “TACO trade,” shorthand for the belief that Trump always chickens out before the damage shows up in earnings.

So far, the trade has paid. The pattern has repeated often enough that the implied volatility on policy-headline days has compressed meaningfully, which is itself a sign that the market has fully internalized the playbook.

What breaks the thesis

The bear case is not hidden. Index concentration in roughly seven names is at multi-decade extremes. Forward earnings multiples on those names sit in the high 20s to low 40s, priced for an AI revenue ramp that has to actually arrive. Long rates have not cooperated with the soft-landing script, and another CPI reading like April’s 333.020 will force the Federal Reserve to keep its hand off the cut button. If the cut cycle stalls and the AI capex pause arrives in the same quarter, the multiple compression in the leadership names would be ugly, and there is no obvious cohort of cheap stocks waiting to take the baton. Small caps are still nursing balance sheet damage from the rate cycle, and international equities, while cheaper, carry their own currency and policy risks.

There is also the simple matter of positioning. Hedge fund net exposure to U.S. equities is near the upper end of its multi-year range, systematic strategies are loaded, and retail has been a persistent net buyer through every dip. When everyone is on the same side of the boat, the unwind, when it comes, tends to be sharper than the fundamentals would justify.

The regular American has made a lot of money in 18 months. The index is up 8.5% year to date and 25% over the past year. Rebalancing back to a target allocation is not a market call, it is basic discipline, and it is the sort of move that looks boring in a melt-up and brilliant in a drawdown.