Cleveland-Cliffs Rally Tops S&P 500, Can It Continue?

Key Points

• Cleveland-Cliffs stock is outperforming the S&P 500 by a wide margin this month, driven by several fundamental tailwinds that are set to continue further.
• With institutions buying more and more of the stock, chances are that investors will get to see higher prices.
• Policy changes in tariffs and other industry dynamics are the perfect tailwinds for Cleveland-Cliffs to keep climbing.

Many investors see U.S. trade tariffs as a hurdle to business growth; however, some are benefiting domestic firms in the basic materials sector. These tariffs boost local production and support a broader onshoring trend. President Trump advocates for onshoring industries like autos, semiconductors, and data centers in the U.S. While it might seem limited to big tech firms, this shift creates significant opportunities in the steel industry, crucial for expanding domestic capacity.

This is exactly where shares of Cleveland-Cliffs Inc. NYSE: CLF can be a worthy addition to an investor’s watchlist in the coming months, even after the stock has recently broken out into a new 52-week high. There are several compelling reasons to believe this stock has significant upside potential that isn’t currently priced in, stemming from both the business and government sides of the equation.

Not Just One Tailwind for Cleveland-Cliffs

Starting with policy, the company has applauded the government’s recent decision to include electrical steel and stainless steel derivative products in the Section 232 article. Essentially, this inclusion makes importing these metals significantly more expensive (since they’re now subject to 50% tariffs), which is why Cleveland-Cliffs agrees, as they can capture that market share.

More than just an accommodating policy change, investors should also consider the commodity cycle itself. Steel prices today are trading near a five-year low, after peaking in late 2021. Now that the Federal Reserve has begun cutting interest rates, this may create a new bull market cycle for certain commodities.

As business and consumer spending recover on these more accommodative rates, steel demand could rise, especially in this onshoring initiative for items that require steel as an input. This scenario would represent a direct benefit and tailwind for Cleveland-Cliffs, resulting in improved margins and earnings per share (EPS), ultimately leading to higher valuations.

In fact, this may be one of the potential outcomes already being priced into Wall Street analyst forecasts for Cleveland-Cliffs' future financials, as investors can note the 17-cent EPS MarketBeat forecast set for the second quarter of 2026, which could result in a significant swing compared to today’s net loss of 50 cents.

What’s Sending the Stock Rallying Today?

In just the past month, Cleveland-Cliffs has surged by 19.1%, beating the S&P 500 by over 15%. For a steel company embroiled in tariff controversies to outperform the market significantly, there must be solid reasons to convince investors to support such a name.

One of these reasons is the foreshadowing that’s already happening inside the company’s latest quarterly earnings results. With a record 4.3 million tons of steel shipments, Cleveland-Cliffs is already seeing the benefits of tariffs, which are bringing back domestic demand and increasing all the tailwinds for this stock to continue reeling in higher profit margins.

Using these themes as a thesis for the company's future, investors shouldn’t be surprised to see State Street increase its Cleveland-Cliffs holdings by 20.2% in August 2025, reaching $208.6 million or 5.5% ownership. This level of ownership signals strong faith in Cleveland-Cliffs' prospects, which, given the tailwinds, are likely to materialize. This optimism extends beyond institutions, too.

Cleveland-Cliffs' stock’s short interest declined by 3.3% over the past month to show potential signs of bearish capitulation, even in the middle of all this tariff uncertainty happening all across the United States.

Recognizing the vital role Cleveland-Cliffs plays in the onshoring of several industries, along with the increasing market share this Section 232 inclusion brings, investors may consider adding this name to their watchlists, especially those seeking a favorable risk-to-reward ratio.