Merchants work on the ground on the New York Inventory Trade on June 23, 2025.
Brendan McDermid | Reuters
An aggressive commerce warfare, Center East escalation and AI competitions abroad — None of 2025’s huge curveballs managed to spoil the market’s epic comeback from the yr’s lows as shares stand inside attain of a brand new document. This is why.
The S&P 500 is lower than 0.1% away from closing at a brand new document, rebounding from a close to 20% sell-off in April. The tech-focused Nasdaq 100 is already one step forward, hitting an all-time excessive on Tuesday. The most recent leg greater got here as buyers guess a ceasefire within the Center East may forestall a significant disruption to world oil provide.
“I am shocked by the magnitude of the rebound,” stated Kevin Simpson, portfolio supervisor at Capital Wealth Planning. “While you issue within the geopolitical backdrop — the continued battle, volatility and uncertainty — I would not have anticipated the S&P 500 to snap again to new highs this shortly. This type of power speaks to only how a lot liquidity remains to be within the system and the way keen buyers are to purchase dips in a market dominated by megacap tech and AI enthusiasm.”
General, the wall of fear has been crumbling little by little over the previous 4 months. Maybe most significantly, President Donald Trump backed off from the stiffest tariffs on key U.S. companions as international locations proceed to barter commerce offers in the summertime. Earlier this month, the U.S. reached a commerce truce with China with Beijing agreeing to produce uncommon earths.
“We count on extra commerce offers to supply some extra readability and finally scale back company, client and investor anxiousness,” Chris Haverland, world fairness strategist at Wells Fargo Funding Institute., stated in a word. “Deregulation, tax cuts and decrease short-term borrowing charges ought to additional bolster earnings.”
Additionally, company earnings have held up nicely regardless of coverage uncertainty. For the second quarter, the S&P 500 earnings grew by 4.9%, marking the eighth consecutive quarter of year-over-year earnings development for the index, in line with FactSet.
Economic system in good condition
Another excuse for market resilience is the U.S. financial system, which stays on stable footing. The unemployment price stays low at 4.2% additionally the Might nonfarm payrolls report confirmed solely a slight softening within the labor market. Probably the most current inflation knowledge additionally indicated that tariffs have finished little to have an effect on costs.
The Federal Reserve expects to make two price reductions later this yr, in line with the carefully watched “dot plot.” Fed Chair Jerome Powell reiterated that he expects policymakers to remain on maintain till they’ve a greater deal with on the impression tariffs could have on costs.
“In our baseline situation we consider a US recession will probably be prevented,” Dubravko Lakos-Bujas, chief world fairness strategist at JPMorgan, stated in a word to shoppers. “Latest weak point in a few of the labour market indicators and restricted pass-through from tariffs to inflation thus far may immediate a Fed easing sooner than our December forecast.”
AI story intact
In the meantime, the unreal intelligence story that has supported the market nicely over two years continues to be unfazed. The most recent earnings season has restored investor confidence — Nvidia continued to develop at a speedy clip, whereas Large Tech’s spending on AI hasn’t slowed down. Buyers have been rattled at first of the yr as China’s DeepSeek startup raised the query whether or not the billions of {dollars} of funding was justified.
Nvidia main the rally
“The secular pattern of AI stays sturdy, and up to date adoption and monetization tendencies ought to underpin the subsequent leg of the AI rally amid a supportive backdrop,” Ulrike Hoffmann-Burchardi, head CIO world equities at UBS, stated in a word to shoppers.
JPMorgan estimated that AI may drive $1 trillion of spending by 2030, together with investments in generative AI computing, networking and storage infrastructure.
Nonetheless, the subsequent few weeks may deliver extra volatility to the market. Buyers are bracing for a July 8 deadline for reciprocal tariff suspension, whereas extra jobs knowledge are on deck subsequent week to gauge the well being of the labor market.
“Markets usually are likely to see extra volatility within the construct as much as conflicts after which rally or flip to different elements as soon as it is began,” stated Carol Schleif, chief market strategist at BMO Non-public Wealth.
