After a prolonged period of sensitivity to the oscillations of United States trade policies, there appears to be a shift in the posture of stock market investors. The evidence suggests a newfound resilience emerging, as investors cautiously adopt an optimistic outlook, positing that the worst impacts of tariffs have been navigated. In the previous fortnight, U.S. stocks have demonstrated a modest uptick. This recent buoying allows us to see the culmination of a potent rally bringing the S&P 500, a standard index, to within 3% of the record-high levels seen in February.
The drivers behind this rally are multi-faceted, but a significant contributing factor has been the easing of concerns over the repercussions following the imposition of tariffs. With the flurry of the changing U.S. trade policy and tariff talks, it was expected for the stock market to demonstrate a volatile behaviour. Interestingly, in contrast to those expectations, stocks finished with an upward trend even after facing a potentially destabilizing announcement – President Donald Trump’s declaration of elevated steel tariffs to 50%.
Notably, the President’s revelation of this ‘Liberation Day’ tariff, made on the 2nd of April, resulted in a significant downturn in stock values, triggering what was arguably some of the most substantial market volatility since the outbreak of the COVID-19 pandemic half a decade ago. Following these fluctuations, we have seen a calming of volatility indicators. Alongside the stabilization trend of the market, there are also indications that the technical harm inflicted by this downturn has been mitigated.
Despite these positive signs, investors recognize that the market remains fragile and prone to daily market movement contingent on the state of U.S trade talks. As pivotal negotiations ensue with global trading partners in the forthcoming weeks and months, heightened valuations may render the stocks more susceptible to unpredictable setbacks. The S&P 500 index witnessed a sharp dip on April 8, almost reaching the threshold of a recognized bear market. However, a remarkable recovery has been seen since then.
The S&P 500 index has exhibited an impressive upward swing of nearly 20%, consequently neutralizing its losses for the ongoing year. As we stand at the mid-year point of 2025, the said index registers a 1.5% rise. Taking into perspective President Trump’s tariffs, while they present a latent risk to the market, investors no longer regard them as a majorly disruptive event.
The perception of the market has evolved from a phase where tariffs were considered the sole determining factor, to a new phase where they remain significant but not singularly so. This shift in investor sentiment has resulted in a more promising perspective for equities moving forward. Subsequently, financial service providers have revised their predictions and raised end-of-year projections for the S&P 500 index.
The reassessment of this key index gauge, guided by the less severe anticipated impacts of tariffs on corporate profits, comes as an optimistic hint. Amid the challenges, strategists have been able to increase their year-end targets for the S&P 500 to 6,550. This reflects an increase of approximately 10% relative to present levels, thereby marking a positive turnaround in the financial landscape.