When 2025 opened, there was plenty of talk of a boffo year for stocks. Tax cuts were coming. Deregulation was coming. Maybe the Federal Reserve would cut interest rates more.
So, there was talk the Standard & Poor's 500 would end the year possibly at 7,000 or higher, which would mean a 19% gain on the year.
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Yes, there might be some tariff increases, but no one — but no one — expected the panic that overtook markets when President Trump unveiled his tariff plans on April 3.
The S&P 500 fell as much as 10.4% in the next two days.
The president then dialed back the tariff increases, subject to getting trades negotiated by July 9.
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And, lo and behold, the S&P took off. From an April 7 low, the index has roared back, rising nearly 28% and ending Friday at a record 6,173 after reaching an intraday high of 6,188. 7,000 may seem over-the-top, but . . .
A quarter comes to a nice, bullish finish
For the quarter so far (with one day to go), the S&P 500 is up 10%. It's up 4.4% in June and nearly 5% on the year.
The year-to-date return is about the same at the Nasdaq Composite Index; the Nasdaq-100's gain is 7.2% on the year and 17% for the quarter.
So, if the S&P 500 hits 10% gains per quarter for the rest of the year, the index would finish 2025 at, maybe, 8,200, a gain of some 40%.
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If you think that's doable, we can think of a bridge you might buy in Brooklyn.
In short, we're being a tad silly.
Nonetheless, the S&P 500 will end the quarter higher, with the technology sector up 21% and the industrial sector up 12%.
Techs are led by Seagate Technology (STX) , up more than 60%, Broadcom (AVGO) , up 61%, and Jabil (JBL) ., up 56% Palantir (PLTR) is up about 45%. Nvidia (NVDA) , Microsoft (MSFT) and Meta Platforms (META) are up 46%, 32% and 28%, respectively.
The industrial sector has risen because of gains in a number of defense and related companies, including Boeing (BA) , naval ship builder Huntington Ingalls (HII) , L3Harris Technologies (LHX) and Howmet Aerospace (HWM) .
A rosy outlook still faces challenges
The current environment is bullish and has momentum that won't last forever. In fact, there face risks a-plenty over the next six months, including:
What will happen with tariffs?
The Administration's July 9 deadline for finishing trade negotiations will probably come and go because there are so many deals to negotiate. China and the United States have agreed on terms for exporting rare earth metals to the United States. India and the United States are close to a deal.
But the president stopped talks with Canada over a tax dispute.
Terms on all agreements, however, will be examined carefully.
And a mistake on tariffs can cause investors to panic as they did in April.
Related: Nike raises prices and puts the blame purely on tariffs
Will earnings coming up meet or beat estimates?
To start, first-quarter earnings were very good with tariffs talked about but having little actual effect. Yet. It depends on how all the negotiations end.
And tax changes as big as the Trump Administration is proposing can cause absolutely unforeseen effects that probably won't be seen until later in the year.
Still, second-quarter earnings look promising. They unofficially have a soft start on July 10, when Delta Air Lines (DAL) reports results.
The parade kicks into higher fear on July 15 when JP Morgan Chase (JPM) and a host of big banks report on July 15.
Amazon.com (AMZN) sports the largest percentage of buy ratings: 97% of total ratings, with 3% holds.
How about geopolitical concerns?
The Middle East is quiet for now. Israel and Iran are not shooting missiles at one another, and Iran has not blocked the Strait of Hormuz, through which 20% of the world's oil flows. The state of Iran's nuclear materials, however, is not clear.
How will financial markets deal with U.S. debt and turmoil with the Federal Reserve?
The fear is that the Trump tax bill will increase the U.S. deficit by trillions of dollars over the next few years, and bond yields will soar. (Senate Republicans were able to win a key procedural vote on Saturday.)
The 10-year Treasury yield was at 4.87% on Jan. 13 and $4.285% on Friday. Meanwhile, it seems that the Fed will cut its key federal funds rate in September, despite President Trump's complaints that Fed boss Jerome Powell, whose terms ends in 2026, is too slow. The traders have expected two rate cuts all this year, with the first coming in September.
Will the market tolerate sky-high valuations?
Two measures to watch: One is the S&P 500 forward price-earnings ratio which was at 25 on Friday. The 10-year average is 18 to 19.
Relative strength indexes are very high. as many as 55 S&P 500 stocks are Friday at RSIs, above 70, a signal they're overvalued. It fell back to 49 at the end of the day.
Jabil Circuit, Western Digital (WDC) , Seagate Technology and financial giant Goldman Sachs (GS) all had RSIs are 80 or higher. Bull markets, like we're having, can continue with high RSIs for a while — but not forever.
More Tech Stocks:
- Caution ahead: S&P 500, Nasdaq Composite enter overbought territory
- Amazon tries to make AI great again (or maybe for the first time)
- Google plans major AI shift after Meta’s surprising $14 billion move
- Question of the Week: The S&P 500 Pits the Big Dogs Against the Little Dogs
Market closes for July 4
U.S. financial markets and most businesses will be closed on Friday for the July 4 holiday.
Earnings are small in number and include only one S&P 500 component: Constellation Brands (STZ) . The shares have struggled all year as alcoholic beverage consumption generally has slumped. Beer stocks have been weak too.
Trading volume will peak on Tuesday but will fall rapidly Wednesday and Thursday as Wall Street starts the long weekend early.
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