Historic Rebound Sends S&P 500 to New Highs

I knew the tariff wars would destroy the stock market? Hey, WTF? And inflation has fallen to 2.3%.

What's next? Dogs marrying cats?

Historic Rebound Sends S&P 500 to New Highs

The index’s first record since February follows a rapid and dramatic recovery from April’s tariff-induced selloff

By Karen Langley and Krystal Hur, WSJ

Updated June 27, 2025 4:39 pm ET

Well, that was quick.

The S&P 500 on Friday notched its first new high since February, capping a dizzying 24% rally from the depths of April’s tariff-induced selloff. The wild 89 trading days in between records marked the swiftest-ever recovery back to a closing high after a decline of at least 15%, according to Dow Jones Market Data.

Stocks have climbed in recent sessions after the fragile cease-fire between Israel and Iran sent oil prices lower and fueled optimism that the Middle East could avoid a prolonged conflict. Continued trade negotiations between the U.S. and trading partners including China and the European Union have also lifted investors’ spirits ahead of the looming deadline for tariff hikes.

On Friday, the S&P 500 opened above its previous intraday high, surrendered gains after President Trump announced that he was halting trade talks with Canada, then climbed again late in the session to finish up 0.5%. The Nasdaq Composite Index also hit a new record, its first since December, and closed up 0.5%.

In just a few months, investors swung from exuberance about the deregulation and tax cuts they expected from Trump to fear that his decision to launch a global trade war would cripple the economy.

Then the mood shifted again: After shrugging off initial damage to markets, the president declared it was time to buy. He announced a 90-day pause on many of his planned tariffs, sending the S&P 500 soaring 9.5% in its best day since the financial crisis of 2008.

“The market sensed that these tariffs aren’t going to be nearly as onerous as what was presented on Liberation Day,” said Hank Smith, head of investment strategy at Haverford Trust. “You’ve seen the recovery.”

White House press secretary Karoline Leavitt said President Trump could extend a July 9 deadline the administration has set to reach trade deals with dozens of nations facing steep tariffs. Photo: Saul Loeb/AFP/Getty Images

Many investors remain worried that even watered-down versions of the sweeping tariff plans Trump unveiled in early April could slow business spending, hurt growth, increase unemployment and raise prices, reigniting the pandemic-era inflation fight. And Trump’s pause ends in early July.

But so far, evidence of such damage has been sparse.

The country’s biggest corporations reported robust profit growth for the first quarter. The U.S. added more jobs in May than economists anticipated, while the unemployment rate held steady. And data showed consumer prices rose at a muted pace last month, defying concerns that tariffs would begin to rekindle inflation.

“We’ve seen earnings that are resilient,” said Richard Saperstein, chief investment officer at investment firm Treasury Partners. “We’ve seen economic activity remaining buoyant, and we’ve seen inflation not really moving higher.”

One clue that investors don’t expect a major slowdown: The S&P 500’s top-performing sector this year is industrial stocks, a group closely attuned to the strength of the economy. Industrials have risen 11%, compared with a 5% gain by the S&P 500.

At the same time, other corners of the market that typically rally on economic vigor have instead lagged behind. Indexes of small-capitalization stocks are in negative territory this year, with the Russell 2000 down 2.6%.

To some observers, that disparity suggests the market’s advance has been driven at least partly by investors’ anxieties about being left behind. That could leave it vulnerable to a reversal in the case of disappointing or unexpected events.

“People feel they have to be in this market,” said Julie Biel, chief market strategist and portfolio manager at investment-management firm Kayne Anderson Rudnick. “But they don’t necessarily have conviction that the economy is going to be great.”

Another reason for caution: Stocks hardly look cheap. The S&P 500 was recently trading at about 22 times its member companies’ projected earnings over the next 12 months, above a 10-year average of 19, according to FactSet.

With trade negotiations still unfolding, it is too soon to know how U.S. policy and responses from trading partners will settle out. And the effects of initial changes to tariffs are still rippling through the economy.

“An obvious risk is that it just hasn’t hit the data yet and that we’ve still got weaker growth ahead of us, hits in the labor market ahead of us and that the hit to inflation is not yet in the numbers,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.