Wall Street thinks the worst of the trade war is over; Some economic indicators are flashing red; Updates on Five Below and Match Group

1) The trade headlines are still firmly driving the day-to-day market moves...

Yesterday, the news of easing trade tensions with the European Union sent stocks soaring. The S&P 500 Index and the Nasdaq Composite Index both surged more than 2%. And Wall Street seems to think that the worst of the trade war is over.

This new Wall Street Journal article captures the current investor sentiment: Wall Street Bets the Worst of Trump's Trade War Is Behind It. Excerpt:

Investors have eagerly greeted any signs of easing tensions by driving markets higher, hopeful that the U.S. will eventually be able to strike deals with little lasting damage to the economy or corporate profits.

Few think the trade tensions have dissipated, or won't spark near-term stock declines going forward. But many said the worst fears of U.S. restrictions permanently reordering global trade have moderated, and the economic blow is unlikely to be as damaging as it appeared when Trump announced sweeping tariffs on April 2.

The article also notes that:

Investors were also buoyed by a pair of upbeat economic-data reports Tuesday: Consumer confidence rebounded in May, the Conference Board reported, and demand for durable goods dropped less sharply in April than economists expected.

But it ends with a note of caution (that I share):

Stock valuations are still relatively high by historical standards: Companies in the S&P 500 are trading at 21 times their expected earnings over the next 12 months, as of Friday's close, versus a 10-year average of 18.7 times.

Some investors say high equity valuations are at odds with a number of uncertainties still clouding analysts' outlook, primarily the yet-to-be-determined fallout of the Trump administration's approach to trade.

Regular readers will recall what I said in my e-mail last Friday:

I don't expect a 50% tariff on the EU and a 25% tariff on iPhones. But I do think that investors have been overly complacent recently – and perhaps forgetting that the trade tensions are far from fully over.

So don't get too comfortable – and remember to stay alert for high volatility.

2) While some economic indicators are strong – such as the two noted in the WSJ article above – others are flashing red. I'll cover a few below from some recent posts and charts on social platform X that caught my eye...

First, as the chart in this post from Charles Schwab Chief Investment Strategist Liz Ann Sonders shows, inflation may be rising:

Up next is a post from the Kobeissi Letter last week. As you can see in the chart in the post, a measure of American consumers' expectations about their financial situation over the next year has hit an all-time low:

Meanwhile, as you can see in the chart from this Barchart post last week, Americans are falling behind on their car payments:

And take a look at the chart in this post from last week – credit-card delinquencies are rising:

In summary, the sharp market rally in the past seven weeks feels like too much, too fast in light of the ongoing uncertainty regarding the economy.

So while I'm not bearish, I remain cautious...

3) Shares of discount retailer Five Below (FIVE) – about which I've written many times – jumped more than 8% yesterday on continued optimism that the tariffs won't be so bad.

In fact, the stock has more than doubled since I highlighted it in my April 4 e-mail – the day it hit a multiyear low. As I said at the time:

This is still a good company, and its stock would be a huge beneficiary if Trump eased the tariffs. And I'm not sure it makes a lot of sense that Five Below gets clobbered while Walmart (WMT) (down 2.8% yesterday) and Costco Wholesale (COST) (up 0.2% yesterday) are mostly unscathed.

My team and I didn't recommend Five Below in our Stansberry's Investment Advisory newsletter, which we publish monthly. But we're continuing to keep an eye on it...

4) Meanwhile, another stock I like made an appearance in the WSJ today...

I'm talking about dating-app operator Match Group (MTCH), which I last gave an update on in my May 12 e-mail.

As the WSJ notes in this article, CEO Spencer Rascoff seems to be doing a lot of smart things: Tinder's New Chief Is Out to Change Its Hookup-App Reputation. Excerpt:

Tinder, the app that revolutionized online dating for millennials, is falling flat with Gen Z. Its new leader wants to change that.

His plan? Shake off Tinder's reputation as a site to go to mostly for hookups...

[Rascoff] called on staff to speed up new product changes, leverage artificial intelligence and bake in features that boost user safety. Employees should focus on improving people's experiences on the app, even at the expense of short-term revenue, he said...

Tinder's team is also creating low-pressure ways for people to meet on the app, aimed at wooing Gen Z.

I'll also note that someone posting anonymously under the handle tharp05 just pitched MTCH on my favorite stock-idea website, Value Investors Club.

Only members can see the full ideas until 45 days after they're posted (the entire MTCH pitch is here), so I'll share some excerpts below:

Two factors make [MTCH shares] compelling today:

Aggressive Capital Returns – In December 2024, Match committed to returning >100% of free cash flow through year-end 2027 via buybacks and dividends – equating to over 25% of enterprise value and more than 35% of market cap at today's levels.

New Leadership – In February 2025, Spencer Rascoff (co-founder of Zillow and veteran tech operator) was appointed CEO. He will also lead Tinder, creating the potential for improved product and execution.

The threats facing Match are real – but priced in. With disciplined capital allocation and modest operational improvement, shares could roughly double from the current price.

As tharp05 concludes in the pitch:

The risks at MTCH are visible and widely recognized, yet management's grasp of the issues appears equally clear. There is a competent leader in charge of Tinder, with a plan for addressing key product issues and allocating overall capital. Given the negative sentiment baked into valuation and strong potential returns from decent performance, MTCH seemed worth bringing to the attention of the VIC community again.

My conclusion, which I shared on May 12, remains the same:

Match generates a ton of [free cash flow] – which it's returning to shareholders. And I suspect that the new CEO, Spencer Rascoff, is doing the right thing in cutting the workforce by 13%.

Lastly, the stock has collapsed since its highs a few years ago – the value-investing bargain hunter in me likes to see charts like this:

If Match can start to show year-over-year growth, which isn't a high bar in light of the weak numbers over the past year, I suspect the stock could quickly double.

If my team and I decide that Match looks compelling enough to add to the Investment Advisory model portfolio, subscribers will be the first to know. (If you aren't a subscriber already, you can find out how to become one – and gain instant access to all of our current open recommendations – right here.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.