Stock Market Update

The S&P 500 is on the edge of reaching a record high. It’s quite a turnaround, considering the index was flirting with a bear market just a couple of months ago.

As of Tuesday, the S&P 500 was merely 0.85% away from its all-time peak.

On Wednesday, U.S. stocks had a mixed opening. Dow futures dropped 25 points, while S&P 500 futures were mostly steady, and Nasdaq 100 futures rose by 0.15%.

The S&P 500 has seen a 2.1% increase in the last couple of days, fueled by a fragile ceasefire between Israel and Iran. With the market nearing new peaks, there’s some speculation about whether there’s still potential for growth or if obstacles may lie ahead.

“With tensions in the Middle East easing, investors are likely to shift their focus back to fundamental issues like tariffs, revenue, federal deficits, and, of course, President Trump’s significant legislative efforts.”

Even with various challenges, including the potential for renewed inflation due to higher tariffs, some analysts on Wall Street believe there’s still potential for stock growth.

Mohit Kumar, an economist and strategist at Jeffries, mentioned in a note, “We’re not anticipating a massive surge from current levels, but we feel the path of least resistance leans toward gradual increases.”

Market Volatility

The U.S. stock market has been quite volatile this year. After falling into correction in March and nearing bear market status in April, it made a strong recovery in May and June, resulting in over a 3.5% gain since the year began.

The S&P 500 recently hit new highs, rebounding after slumping earlier in Trump’s second term, specifically from February 19th.

The decline started in March and April when tariffs were announced, yet it seems to be on an upward trajectory again.

Following the initial tariffs announced on April 2, the S&P 500 fell to its lowest point on April 8, down 18.9% from its February peak.

The index rebounded sharply in April after the administration modified tariffs, and it posted a significant 6.15% gain in May, marking its best monthly performance since November 2023 and the strongest since May 1990. So far in June, it’s climbed a further 3%.

While the Trump administration has announced a trade deal with the UK and a ceasefire in the trade war with China, many investors seem to believe that the worst of the tariff disruption may be behind us.

As the market recovers, there’s been growing momentum, particularly in artificial intelligence sectors. The Nasdaq 100 reached an all-time high recently, marking the first new record since February. This index is comprised mainly of leading U.S. tech companies.

According to Baird’s investment strategist Ross Mayfield, tech and AI stocks are beginning to take the lead in the U.S. market. He remarked, “Could it turn into a bubble at some point? It’s certainly possible, though I’m not convinced we’re there yet. Still, the leadership of these big tech names is hugely significant for a market that’s heavily invested in that sector.”

Wall Street has been keeping an eye on the developments surrounding the Israeli-Iran situation while also gauging the trade outlook. Investors are attempting to ascertain where tariff rates might settle and what other factors could influence the market.

Currently, average tariff rates are at their highest in nearly a century. Toston Sloak, chief economist at Apollo, mentioned in recent notes that this trend could lead to slower economic growth, heightened inflation, and rising interest rates—factors that could significantly challenge the S&P 500.

Geopolitical tensions and the impending second-quarter earnings reports, starting in mid-July, could also impact investor sentiment, according to Eric Friedman, CIO of U.S. Bank Asset Management. He emphasized, “How companies manage rising tariff costs will be crucial for investors as they assess future effects on inflation, interest rates, and economic growth.”

Kumar from Jeffries noted that he’s closely watching U.S. employment data over the summer.

Brigati of SWBC advised investors to stay the course, saying, “It’s wise to keep investing without overreacting to short-term market news that could adversely affect stock prices. Timing the market is nearly impossible, so a disciplined, long-term investment strategy is key.”