How the stock market made it back to a new record — even with so much still to worry about

An assertive commercialized war, Middle East escalation and AI competitions overseas — None of 2025's large curveballs managed to spoil the market's epic comeback from the year's lows arsenic stocks basal wrong scope of a caller record. Here's why.

The S&P 500 is conscionable 0.85% distant from closing astatine a caller record, rebounding from a adjacent 20% sell-off successful April. The tech-focused Nasdaq 100 is already 1 measurement ahead, hitting an all-time precocious connected Tuesday. The latest limb higher came arsenic investors stake a ceasefire in the Middle East could forestall a large disruption to planetary lipid supply.

"I'm amazed by the magnitude of the rebound," said Kevin Simpson, portfolio manager astatine Capital Wealth Planning. "When you origin successful the geopolitical backdrop — the ongoing conflict, volatility and uncertainty — I wouldn't person expected the S&P 500 to drawback backmost to caller highs this quickly. This benignant of spot speaks to conscionable however overmuch liquidity is inactive successful the strategy and however anxious investors are to bargain dips successful a marketplace dominated by megacap tech and AI enthusiasm." 

Overall, the partition of interest has been crumbling small by small implicit the past 4 months. Perhaps astir importantly, President Donald Trump backed disconnected from the stiffest tariffs connected cardinal U.S. partners arsenic countries proceed to negociate commercialized deals successful the summer. Earlier this month, the U.S. reached a commercialized truce with China with Beijing agreeing to proviso uncommon earths.

"We expect much commercialized deals to supply immoderate further clarity and yet trim corporate, user and capitalist anxiety," Chris Haverland, planetary equity strategist astatine Wells Fargo Investment Institute., said successful a note. "Deregulation, taxation cuts and little short-term borrowing rates should further bolster earnings."

Also, firm net person held up good contempt argumentation uncertainty. For the 2nd quarter, the S&P 500 net grew by 4.9%, marking the eighth consecutive 4th of year-over-year net maturation for the index, according to FactSet.

Economy successful bully shape

Another crushed for marketplace resilience is the U.S. economy, which remains connected coagulated footing. The unemployment complaint remains debased astatine 4.2% besides the May nonfarm payrolls report showed lone a slight softening successful the labour market. The most recent ostentation data also indicated that tariffs person done small to impact prices.

The Federal Reserve expects to marque 2 complaint reductions aboriginal this year, according to the intimately watched "dot plot." Fed Chair Jerome Powell reiterated that helium expects policymakers to enactment connected clasp until they person a amended grip connected the interaction tariffs volition person connected prices.

"In our baseline script we judge a US recession volition beryllium avoided," Dubravko Lakos-Bujas, main planetary equity strategist astatine JPMorgan, said successful a enactment to clients. "Recent weakness successful immoderate of the labour marketplace indicators and constricted pass-through from tariffs to ostentation truthful acold could punctual a Fed easing earlier than our December forecast."

AI communicative intact

Meanwhile, the artificial quality communicative that has supported the marketplace good implicit 2 years continues to beryllium unfazed. The latest net play has restored capitalist assurance — Nvidia continued to grow astatine a accelerated clip, portion Big Tech's spending connected AI hasn't slowed down. Investors were rattled astatine the opening of the twelvemonth arsenic China's DeepSeek startup raised the question whether the billions of dollars of concern was justified.

Nvidia starring the rally

"The secular inclination of AI remains robust, and caller adoption and monetization trends should underpin the adjacent limb of the AI rally amid a supportive backdrop," Ulrike Hoffmann-Burchardi, caput CIO planetary equities astatine UBS, said successful a enactment to clients.

JPMorgan estimated that AI could thrust $1 trillion of spending by 2030, including investments successful generative AI computing, networking and retention infrastructure.

Still, the adjacent fewer weeks could bring much volatility to the market. Investors are bracing for a July 8 deadline for reciprocal tariff suspension, portion much jobs information are connected platform adjacent week to gauge the wellness of the labour market.

"Markets often thin to spot much volatility successful the physique up to conflicts and past rally oregon crook to different factors erstwhile it's started," said Carol Schleif, chief market strategist astatine BMO Private Wealth.