US Stocks Reach Record High Amid Ceasefire and Trade Deal Optimism

Strategic Insights -

The S&P 500 share index broke through its previous peak, climbing to a record high as investors welcomed a US-brokered ceasefire between Israel and Iran, and a potential trade deal between the US and China. The blue-chip index surged 0.7 per cent to 6,183.51 at midday in New York, surpassing its previous peak in February. This rebound follows a dramatic downturn earlier in the year sparked by Donald Trump's introduction of global tariffs, which sent the S&P 500 plummeting to a 15-month low on April 7.

Key Takeaways:

  • The S&P 500 share index has risen over 23 per cent since hitting a 15-month low on April 7, entering a technical bull market.
  • The index has been boosted by a potential trade deal between the US and China, with Trump announcing that the two nations had "signed" a deal.
  • Investors have also welcomed a US-brokered ceasefire between Israel and Iran, which has eased concerns about potential disruptions to oil exports from the Middle East.
  • The potential scrapping of a provision in Trump's budget bill that would let the administration raise tax on foreign investments has added to the rally.
  • Citi's top US equity strategist, Scott Chronert, expects the S&P 500 to rally a further 2.5 per cent by the end of 2025.
  • Stocks' rebound contrasts with continuing pressure on Treasuries and the US dollar, which fell to a three-year low this week.
  • Trump's landmark tax bill is forecast by some analysts to boost growth and prop up profits.

Statistics:

  • S&P 500 share index rose 0.7 per cent to 6,183.51 at midday in New York, surpassing its previous peak in February.
  • The S&P 500 has risen over 23 per cent since hitting a 15-month low on April 7.
  • The US dollar fell to a three-year low this week due to concerns over the sustainability of growing US debt.
  • Citi's Scott Chronert expects the S&P 500 to rally a further 2.5 per cent by the end of 2025.

Sources:

  • "Peak trade uncertainty is in the past, [the US economy] remains resilient and the narrative has re-centred on AI and growth," said Venu Krishna, head of US equity strategy at Barclays, citing the potential trade deal and economic data.
  • "Regardless of what actually happens with tariffs, the market seems to view them as old and manageable news," said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.
  • "The market doesn't discount the same event twice. There are 'growth scares' and we move on," said Shalett.
  • "A rush of buybacks and retail investors' robust demand have provided the rally further fuel," according to analysts.
  • The Long View, page 18, Gillian Tett, page 9.