S&P 500, Nasdaq Hit New All-Time Highs As Stocks Complete Tariff Comeback

The S&P 500 achieved a new record high of 6,158.48, up 0.2%, marking a 27% recovery from its April low and overcoming the spring selloff driven by tariff concerns, with the Nasdaq also reaching an all-time high. This rebound was largely attributed to the White House's easing stance on trade, robust corporate earnings, and progress in U.S.-China negotiations, despite a higher-than-expected May inflation report (2.7%) that challenges near-term rate cut expectations. However, JPMorgan Chase forecasts a rocky second half for equities, projecting the S&P 500 to end 2025 at 6,000, a 2% decline from current levels, citing lagged policy effects.

Analysis

The S&P 500 reached a new all-time high of 6,158.48, marking a significant 27% recovery from its April 7 low and officially overcoming the spring selloff. This rebound, mirrored by a new record in the Nasdaq Composite, has been largely attributed to a market perception of easing trade tensions, dubbed the "TACO" trade, and was specifically bolstered by strong earnings from Nike and progress in U.S.-China negotiations. However, this bullish momentum is met with considerable headwinds. The market record was set despite a higher-than-expected May inflation report showing a 2.7% annual increase, well above the Federal Reserve's 2% target, which complicates the case for near-term interest rate cuts that would support equity valuations. Further tempering the outlook, JPMorgan Chase has issued a bearish forecast, anticipating the S&P 500 will decline 2% to 6,000 by the end of 2025 due to the "lagged effects of new policies (i.e., tariffs, immigration, DOGE)." The uneven nature of the recovery is also notable, with the Dow Jones Industrial Average still trading 3% below its previous peak.

Key Decisions for Investors

• While the market has reached new highs on positive trade sentiment, investors should remain cautious given the Dow's relative underperformance and the dependence on continued policy de-escalation.
• Monitor inflation data closely, as the reported 2.7% rate poses a significant risk by potentially limiting the Federal Reserve's ability to cut interest rates, which could cap further equity market appreciation.
• Consider the contrarian forecast from JPMorgan Chase projecting a 2% market decline as a key risk factor, suggesting a potential portfolio review to hedge against a second-half slowdown driven by lagged policy effects.
• Focus on stock-specific catalysts, such as the strong earnings reported by Nike, which can provide upside potential even if broader market momentum wanes.