Summary:
The S&P 500 is nearing an all-time high, just 0.85% away, after a strong rebound from near-bear market territory two months ago. Recent gains were driven by easing geopolitical tensions, including a fragile ceasefire between Israel and Iran, and renewed optimism around tech and AI stocks.
Despite headwinds like rising tariffs, inflation risks, and concerns about economic growth, analysts say there’s still room for gradual gains. The Nasdaq 100 hit a new record, led by large tech firms regaining momentum.
Markets dropped sharply in March and April after Trump’s tariff announcements, bottoming on April 8. But they rebounded after Trump walked back some of those tariffs. The S&P 500 rose 6.15% in May and is up over 3% in June, showing its best May performance in decades.
Experts warn that tariffs remain a serious risk, with tariff rates potentially hitting 90-year highs. Investors are now watching for key signals from second-quarter earnings and jobs data, especially how companies handle rising costs.
The overarching message from strategists: stay invested and focus on long-term discipline, not short-term market swings.
The S&P 500 is on the cusp of a record high, marking a stunning turnaround for the market that was on the brink of a bear market just two months ago. On Tuesday, the index closed just 0.85% away from an all-time high.
US stocks on Wednesday opened mixed. The Dow was down 40 points, while the broader S&P 500 gained 0.25% and the tech-heavy Nasdaq Composite gained 0.6%.
The S&P 500 soared 2.1% across the past two days, boosted by a fragile ceasefire between Israel and Iran. As Wall Street inches closer to record territory, investors are left wondering: Is there more room to run, or is resistance looming?
“As Middle East tensions de-escalate, the focus will return to more fundamental concerns for investors such as tariffs, earnings, the federal deficit and President Trump’s One Big Beautiful Bill,”
— Chris Brigati, chief investment officer at SWBC
Analysts Cautiously Optimistic
Despite ongoing headwinds — particularly the potential for inflation triggered by higher summer tariffs — analysts suggest there is still space for modest gains.
“We are not looking for a massive rally from current levels, but believe that the path of least resistance is a grind higher,”
— Mohit Kumar, economist and strategist at Jefferies
Sharp Drop, Steep Rebound
The US stock market has been on a wild ride in 2025. After falling into correction in March and flirting with a bear market in April, the S&P 500 recouped its losses in May and June, now up more than 3.5% year-to-date.
The year began with optimism as the S&P 500 hit a record high on February 19, buoyed by Trump’s second-term momentum. That changed rapidly:
- The index fell sharply in March and April following the president’s tariff announcements.
- After Trump’s “Liberation Day” tariffs on April 2, the S&P 500 hit its lowest point of 2025 on April 8, down 18.9% from the February high.
- Markets rebounded after Trump softened his stance on “reciprocal” tariffs.
In May, the S&P 500 gained 6.15%, its best monthly gain since November 2023 and the best May performance since 1990. So far in June, it has added another 3%.
Although the administration has only finalized a trade deal with the UK and a truce with China, investors appear hopeful that the worst of the tariff confusion is behind.
Tech and AI Lead the Charge
As momentum returns, US tech and AI stocks have regained leadership. The Nasdaq 100 closed at an all-time high on Tuesday, marking its first new record since February.
“Does it become a bubble at some point? I think it’s possible, but I don’t think we’re there yet,”
— Ross Mayfield, investment strategist at Baird“And in the meantime, getting leadership from these big tech names is huge for a US market that’s hyper-concentrated in that area.”
Still, some on Wall Street are skeptical of the rally’s foundation.
“The market is looking through some of the present and clear risks associated with tariffs and how they might impact the economy,”
— Keith Buchanan, senior portfolio manager at Globalt Investments“It can do that at times in an irrational way. There are concerns about what the future holds from a profitability standpoint.”
Economic Headwinds Remain
As geopolitical tension wanes, investors are watching for fresh indicators:
“The current average tariff rate would still result in the highest tariffs in 90 years,”
— Torsten Slok, chief economist at Apollo
Slok warns that such elevated tariffs would likely lead to slower economic growth, higher inflation, and sustained high interest rates — key challenges for the S&P 500.
“How companies are absorbing or passing on tariff price increases represents a key item of investor interest in upcoming quarterly releases,”
— Eric Freedman, CIO at US Bank Asset ManagementInvestors will be watching to see how this impacts “inflation, interest rates and economic growth.”
Investor Strategy: Stay the Course
As the market eyes second-quarter earnings and jobs data in July, uncertainty remains.
“The main message for investors is to stay invested and avoid reacting sharply to any news or market reaction that may have a short-term negative impact upon equity prices,”
— Chris Brigati, SWBC
“It is nearly impossible to attempt to time the market, therefore maintaining a disciplined and long-term investing approach serves investors well.”
