“We’ve entered the second half of this year with a very different market than we would have thought,” Osman Ali, portfolio manager at Goldman Sachs Asset Management, said on a recent call with clients.
Among the year’s biggest stock gainers are data firm Palantir, NRG Energy, data center supplier Super Micro Computer, gold miner Newmont and Uber. Meanwhile, food and apparel companies — such as Deckers Outdoor, Lululemon, Brown-Forman, Constellation and Campbell’s — have been weighed down by tariff fears and rank as S&P’s worst performers this year so far.
Wall Street’s path to the new highs has been turbulent. Shortly after the S&P 500 hit its last record in February, investors became alarmed that the leading force propelling stocks higher — massive investments in artificial intelligence — was a mirage. That narrative gained momentum when researchers announced the advent of a Chinese AI model, DeepSeek, that appeared to require far less spending for nearly comparable output.
Between Feb. 19 and March 13, the index fell more than 10%.
But it wasn’t until the April 2 Rose Garden speech, in which Trump announced eye-watering tariffs on dozens of nations, that the S&P plunged another 10% in a matter of days. In two sessions alone, more than $5 trillion in U.S. market value was wiped out — the largest two-day loss in history. Stacked on top of losses year to date, the index seemed headed for an outright bear market, or a 20% drawdown from its February highs.
Finally, on April 9, Trump announced a 90-day pause on the steeper duties. The bottom was in, and the stage was set for a dramatic rebound. Between that date and Friday — despite significant bouts of volatility — the index has gained more than 20%.
Analysts say markets largely figured out that Trump’s tariff rhetoric was frequently more severe than the policies that ultimately emerged. In recent weeks, said Michael Antonelli, market strategist with Baird Private Wealth Management, the president has stopped front-footing trade duties as he works to get his spending and tax cut bill through Congress and manage the conflict in the Middle East.
Investor sentiment has also been buoyed by the perception that some Federal Reserve officials are signaling openness to lowering borrowing costs in the economy as inflation has cooled and the job market has weakened. Lower interest rates tend to boost stocks as more money becomes available to invest in them.
“Why do we want to wait until we actually see a crash before we start cutting rates?” Fed Governor Christopher Waller said in a CNBC interview last week, referring to the job market. “So I’m all in favor of saying maybe we should start thinking about cutting the policy rate at the next meeting.”
More simply, corporate earnings — which stock prices are designed to reflect — have held up. According to Yardeni Research markets analysis group, current earnings estimates are only slightly off their targets heading into the year. Analysts say investors have been rewarding firms for keeping headcounts low and for investing in AI.
Yet plenty of questions remain about stocks’ ultimate trajectory.
“We do not believe that the current policy turbulence is going to go away,” Torsten Slok, chief economist at Apollo Global Management, said in a note to clients this week. “This is not a political view; it’s just a view expressing that policy uncertainty is elevated and is likely to remain so.”
