The S&P 500 closed at its highest level since February on Friday. This milestone indicates a strong rebound in the U.S. equity market. The index is up for the second week in a row! After breaking the 5,000 mark late last year, it has continued its climb and is now trading just above the 6,000 mark as of Monday. This promising trend comes after a very difficult stretch earlier this year. During that period, the index was in deep negative territory due to concerns about trade policy.
On February 19, the S&P 500 reached its all-time record high of 6,144.15. By April 8, it had fallen as low as 4,982.77. This was about an 18.9% decline from the prior record. This drop was enough to indicate the beginning of a correction. In Wall Street parlance, a correction occurs when asset prices fall at least 10% from their most recent high. Uncertainty from the president’s initial plans to impose enormous tariffs roiled the market. This uncertainty caused major volatility, which deepened the fall.
The S&P 500 has darted up more than 20% since its bottom in early April. This rally is brought to you by a big change in mood on trade policy. Trump Kicks Tariffs Down the Road Analysts have noted the striking reversal from President Trump on the tariffs he once championed, himself. This new regulation makes this very positive for investors. According to Richard Saperstein, “Markets have moved higher on tariff postponement and the perception that they will be more moderate than initially announced.”
The S&P 500’s ascent towards its former record high comes after a turbulent year characterized by wild swings in market performance. The closer the index gets to its all-time high, it’s within 2.4% of regaining 6,144.15 at the moment. Typically, we see a strong snap back recovery with the S&P 500 coming out of a correction. That on average leads to a 10% gain in the following 127 days, stoking hope for its comeback.
Despite the positive trends, experts urge caution. Sam Stovall remarked, “Meaningful, extended gains are not assured.” This sentiment echoes the cautious optimism shared by many analysts, including those at JPMorgan Chase, who stated, “Absent major policy surprises, the path of least resistance is to new highs.” That sounds great, but what that really means is that big optimistic overall trend is vulnerable and future success depends on having a stable, positive trade policy.
Wall Street’s flexibility has proven boundless indeed when it comes to positive outlooks for the S&P 500. At first, banks lowered their year-end projections due to trade war jitters. All of them have now raised their forecasts as a result of much better than anticipated economic data and market conditions. This flexibility in turn demonstrates just how fluid the landscape of market expectations and investor sentiment can be.