S&P 500 Nears Record High as Tech Stocks Lead and Geopolitical Risks Ease

Market Momentum Builds on AI Optimism, Easing Iran-Israel Tensions, and Tariff Clarity

The S&P 500 is now just 0.85% away from setting a new all-time high, marking a sharp turnaround from just two months ago when the index was teetering on the edge of a bear market. Investors are responding positively to a combination of easing geopolitical risk and renewed strength in the technology and artificial intelligence sectors.

What’s Driving the Market’s Comeback?

Over the past two sessions, the S&P 500 rose by 2.1%, fueled by optimism around a ceasefire between Iran and Israel, which has temporarily reduced fears of oil supply disruptions and broader market volatility.

Other key contributors to the rally include:

• Strength in large-cap tech and AI companies

• Signs of stabilization in trade policy

• Improved investor sentiment following a turbulent spring

• Positive performance across global equity markets

Chris Brigati, CIO at SWBC, noted that “as Middle East tensions fade, markets are returning their focus to core economic drivers like tariffs, earnings, and fiscal policy.”

A Year of Swings: From Correction to Recovery

The path to this point hasn’t been smooth. After reaching record highs in February at the start of President Trump’s second term, the S&P 500 saw steep declines in March and April due to the announcement of aggressive new tariffs.

Key moments:

• April 8: The index closed 18.9% below its February peak

• May: The S&P 500 gained 6.15%, its best monthly performance since November 2023

• June: The index is up 3% month-to-date

Markets rebounded sharply after the rollback of “Liberation Day” tariffs and easing tensions with China and the UK.

Tech and AI Back in the Spotlight

Technology and AI stocks are once again driving market momentum. The Nasdaq 100 reached a new record high on Tuesday — its first since February — propelled by strong performances from major tech players.

Ross Mayfield, investment strategist at Baird, stated: “AI and tech leadership is back. It’s not yet a bubble, but it’s a powerful driver for this tech-heavy market.”

Caution Ahead: What Could Derail the Rally?

Despite the surge in optimism, several risks could limit future gains:

• Tariffs: Current rates are the highest in 90 years, potentially slowing growth and keeping inflation elevated

• Inflation: Higher import costs could reignite price pressures

• Interest rates: Persistent inflation may prevent the Fed from cutting rates

• Second-quarter earnings: Investors are watching how companies handle cost pressures

• Government debt: Rising Treasury yields could reduce demand for equities

• Labor market: Summer jobs data may reveal weaknesses in economic resilience

Eric Freedman, CIO at US Bank Asset Management, emphasized that “how companies pass on tariff costs will be critical to understanding future inflation and profit margins.”

Long-Term View: What Should Investors Do?

Market strategists continue to advise a disciplined approach.

“Stay invested. Trying to time the market rarely works,” said SWBC’s Brigati. “A long-term strategy focused on fundamentals remains the best approach, even during short-term volatility.”

As earnings season approaches and trade and geopolitical developments continue to unfold, investors should remain alert — but not reactive.