Why Wall Street strategists are keeping an eye on recent stock market records
Stock will be shown Historic Comeback From April lows of the S&P 500 (^gspc) and Nasdaq Composite (^ixic) The first half of the year will be concluded with high notes. Both indexes are notched Multiple record highs this week After the S&P 500 reached its first high since February on June 27th.
The phrase captures the belief among some investors that the president often talks about tariffs, but rarely continues. This assumption has helped drive market tailwinds in recent months as traders increasingly bet on last minute policy pivots.
China-UK trade agreement framework It is reportedly on the table ahead of Trump’s July 9 deadline. This has led to investors being priced “Goldilocks scenario” For stocks with sustained revenue growth, little impact from tariffs and reduced profits from the Federal Reserve.
But Wall Street Pros I’m being careful When they assess the path they advance, it still includes a lot of unknowns.
“There are several areas where this optimism is likely to be challenged when Goldilocks wakes up from sleep and stands up against the three bears,” wrote Jpmorgan’s economics and policy team, led by Bruce Kassman, in a recent client note.
Kassman warns investors that they are “crazy with the momentum of inflation,” and warns tariffs are still set to rise. Despite continued trade negotiations. This adds pressure to the US economy, which is already underway. Softer consumer demand Signs that will stall global factory activity.
“The economy is on a shaky footing in the second half of the year,” added Bill Adams, Chief Economist at Comerica Bank.
Uncertainty is exacerbated by mixed economic signals, including a downward revision to GDP growth in the first quarter. A slight increase in PCE inflationand Continuous billing It has reached its highest level since 2021, indicating the softness of the labor market.
“There are several yellow flags in the economy, but there are no clear red flags yet,” Aditya Bhave, a senior US economist at Bank of America, said in a call with a reporter. “We’re at a fork on the road,” he said. “If something breaks, it will break soon.”
President Trump speaks to the media before riding the Marines across the Southern Lawn of the White House, heading to Andrews, joint base, Andrews, on July 1st. ・Associated Press
But the market is almost shrugging these fears in favor of more optimistic indicators.
For example, the latest data released on Thursday showed Strong non-farm salary profits in June And then there was a surprising downtick in the unemployment rate. Previous data for the week showed job openings It rose unexpectedly in May Furthermore, to reach its highest level since November 2024, economists have also said it could ease inflation in areas such as housing and energy.
“If the Fed is cut in the second half of 2025, that’s more likely because inflation is lower than expected than expected than expected,” Adams said.
The timing of the Fed rate reduction remains one of the most enthusiastically debated topics heading into the second half of the year as President Trump Continue the pressure A central bank to reduce interest rates.
“We believe that we’re cutting back on the next two meetings,” an economist at Morgan Stanley wrote in this week’s note. It’s the real market is beginning to digest, and futures are recalibrating the possibility of Fed rate reductions after strong employment numbers in June.
As of Thursday afternoon, the market priced around 67% of the time the Fed would be cut by the end of the September meeting, down from the 93% chance seen a week ago CME FedWatch tool by the entire.
Morgan Stanley believes the Fed will provide seven interest rate cuts in 2026, supported by the expected arrival of a more solid Fed chair after Jerome Powell departs early next year.
JPMorgan reiterated its caution, saying in the next two reports that it is unlikely that the Fed will be easier unless the Dips drops, saying that personal pay growth is “not far below 100,000.”
To that point, Powell has consistently emphasized the central bank’s patient ability to assess economic fallout from rising tariffs.
“The magnitude of the impact of this type of shock, which probably wasn’t nearly 100 years, is extremely difficult to ensure certainty,” Claudi Oilligoyen, head of global economics at Bank of America, said in a call to mid-aged outlook with a reporter on Tuesday.
He added: “Uncertainty is worse than bad news,” and explained, “If the rules of the game are not clear, companies cannot commit to long-term investments.”
Ally Canal I am a senior reporter on Yahoo Finance. Follow her with x @Allie_Canal, LinkedIn, Email her to alexandra.canal@yahoofinance.com.
