The trader works on the floor of the New York Stock Exchange on June 23, 2025.
Brendan McDermid | Reuters
Active trade wars, Middle Eastern escalation and AI competitions compete overseas. None of the 2025 Big Curve Balls have ruined the market’s epic comeback from this year’s lowest as they are within reach of new records. This is why.
The S&P 500 is just 0.85% away from closing with new records, rebounding from nearly 20% sold out in April. The tech-centric NASDAQ 100 is already a step ahead, hitting an all-time high on Tuesday. The latest leg came as investors betting that betting a ceasefire in the Middle East could prevent major disruptions in the world’s oil supply.
“I’m amazed at the magnitude of the rebound,” said Kevin Simpson, portfolio manager at Capital Wealth Planning. “Given the geopolitical background – ongoing conflict, volatility and uncertainty – the S&P 500 would not have expected this to return to its new high anytime soon.
Overall, the wall of worry has slowly collapsed over the past four months. Perhaps most importantly, President Donald Trump has retreated from the toughest tariffs on major US partners as the country continues to negotiate trade deals over the summer. Earlier this month, the US reached a trade ceasefire with China, and Beijing agreed to supply rare earths.
In a memo, Chris Haverland, global equity strategist at Wells Fargo Investment Institute, said: “Deregulation, tax cuts and lower short-term borrowing taxes should further strengthen revenue.”
And despite policy uncertainty, corporate revenues are on track. According to Factset, the S&P 500 revenues rose 4.9% in the second quarter, marking the index’s eighth consecutive quarter of year-over-year growth.
A good form of economy
Another reason for the market’s resilience is the US economy, which lies in its solid footing. The unemployment rate remains low at 4.2%. Additionally, the non-farm salary report for May shows only a slight softening in the labor market. Latest inflation data also shows that tariffs have little impact on prices.
The Federal Reserve expects to make two interest rate cuts later this year. Fed Chairman Jerome Powell reiterated that he hopes policymakers will be put on hold until they better deal with the impact they have on prices.
“In our baseline scenario, we believe that the US recession will be avoided,” said Dubravko Lakos-Bujas, chief global equity strategist at JPMorgan, in a note to our clients. “The recent weaknesses in some labour market indicators and limited passthroughs to previous inflation from tariffs could encourage them to be eased faster than forecasts in December.”
AI Story is Unharmed
Meanwhile, the story of artificial intelligence that has supported the market for over two years continues to be avoided. The latest revenue season has restored investor confidence. Nvidia has continued to grow with quick clips, but Big Tech’s spending on AI has not slowed down. Investors were rattling at the start of the year as China’s Deepshek startup raised questions about whether the billion-dollar investment was justified.
Stock chart icon Stock chart icon
Nvidia leads the rally
“The secular trends in AI remain strong, and recent adoption and monetization trends should support the next leg of the AI rally amid a supportive background,” Ulrike Hoffmann-Burchardi, CIO Global Equity Head at UBS, said in a note to clients.
JPMorgan estimated that AI could drive $1 trillion in spending by 2030, including investments in generated AI computing, networking and storage infrastructure.
Still, the next few weeks could bring more volatility to the market. Investors are enduring the July 8 deadline for mutual tariff suspensions, but next week there is an increase in employment data to measure labor market health.
“We’ve seen you get a lot of money,” said Carol Schlife, chief market strategist at BMO Private Wealth.
