(Bloomberg) – The S&P 500 Index has been hovering near its all-time high for several weeks, buoyed by some positive economic indicators, even as Wall Street grapples with concerns over a costly stock market amid rising global uncertainties.
These worries became more pronounced when Israel and Iran exchanged missiles and threatened to escalate conflicts in the Middle East. Consequently, oil prices surged by 14% on Friday, and 10-year Treasury yields ended a four-day decline, starting to rise again. The CBOE Volatility Index (VIX) climbed above 20.
For the stock market, things were somewhat subdued until selling pressure emerged later in the day, pushing the S&P 500 down by 1.1%. Nevertheless, after fluctuating through the week, the index essentially closed where it started, remaining nearly 3% shy of its record high.
Julian Emmanuel, chief equity and quantitative strategist at Evercore ISI, remarked, “I don’t see trading up to a record high in 2025. I think I’ll wait for 2026.” He pointed out multiple factors like the situation in Israel and Iran, tariffs, and various event risks. “I think summer will bring pressure until uncertainties ease, which could eventually lead to a new historic high.”
Despite these challenges, investors don’t seem overly alarmed. In fact, the predictive correlation gauge for the 50 largest S&P 500 components is nearing its lowest level since February, suggesting that stock movements may be increasingly dictated by company performance rather than broader macroeconomic trends.
This isn’t the most typical environment for trading stocks. Usually reliable catalysts are either underperforming or are historically muted in their impact. Data from Bloomberg indicates the S&P 500 has changed by no more than 0.6% in 11 of the last 13 sessions.
The possibility of a new high for the S&P 500 appeared promising earlier this week but faltered with the recent fighting in the Middle East. Soft indicators of the consumer price index and producer price index suggested inflation was manageable. A strong auction by the Ministry of Finance also added some optimism, and resolutions of trade tensions between the U.S. and China seemed to signal a positive shift. Yet, the benchmark index barely budged, even moving down after the optimistic CPI release.
According to Michael Kantrowitz, chief investment strategist at Piper Sandler & Co., “We’re witnessing a trend of ‘buying rumors and selling news.’ We’ve seen a lot of positive speculation, but now it feels like we’re entering the ‘selling news’ stage.”
Additionally, the uncertainty emanating from Washington has deterred larger investors from buying stocks at current prices. Deutsche Bank AG noted that major money managers are historically underweight in these market conditions.
Keith Buchanan, a senior portfolio manager at Globalt Investments, commented on the climate, saying, “The market is asking, ‘What’s next?’”
Even the slightly softened trade rhetoric from Trump hasn’t reignited market enthusiasm as it did previously. Although a trade agreement framework between the U.S. and China was established last week—an announcement that would usually send stocks soaring—negotiations fell flat as they merely reinstated high tariff levels already in place.
Dan Greenhaus, Chief Economist and Strategist at Solus Alternative Asset Management, stated that “investors are likely looking for something more concrete compared to what has been previously offered.”
A trend toward safety is evident in the stock market, as traditional safe-haven sectors are currently thriving while investors shy away from riskier assets. The Real Estate, Energy, and Pharmaceutical sectors have demonstrated strength this month, in contrast to the leading tech stocks that had previously dominated the index but are now one of the poorest performing groups.
This shift toward safety is understandable given the backdrop of rising global concerns. The market’s current price levels have raised questions, particularly as the first-quarter optimism now seems out of touch with financial risks that are becoming increasingly apparent.
Kevin Gordon, a senior investment strategist at Charles Schwab & Co., noted that the surge of Chinese artificial intelligence startup Deepseyk follows earlier tariff discussions initiated by the Trump administration. While the market has managed to suppress some losses, the underlying risks remain significant.
“We certainly managed to smooth over the immediate stresses, but there are challenges that continue to threaten the market,” he concluded, highlighting the existing issues related to rising tariffs and slowing labor growth. The market’s performance has been unusually resilient despite these headwinds over the past month.
