The S&P 500's Record Run: Is This Rally Built to Last?

The S&P 500 hit fresh highs in June 2025, closing at 5,967.84 on June 19 before surging further to 6,279.35 by July—a stark contrast to the market's rollercoaster ride earlier this year. But here's the rub: Can this rally survive the Fed's hawkish stance, a slowing jobs market, and the chaos of trade wars? Let's dig into the data and find out.

The Fed's Tightrope Act

The Federal Reserve's June decision to keep rates at 4.25%-4.5% sent a clear message: they're not done fighting inflation yet. While investors bet on two rate cuts by year-end (), the central bank remains fixated on taming prices. The Fed's updated forecast—3% inflation for 2025—hints at a “wait-and-see” approach, but here's the catch: trade wars could upend everything.

President Trump's tariff threats, including the “Liberation Day” levies on Chinese imports, have already spooked companies. Walmart warned of $1 billion in tariff costs, while Procter & Gamble slashed 7,000 jobs to offset rising expenses. These aren't just anecdotes—they're red flags for the consumer discretionary sector, which is still lagging behind tech and healthcare.

Jobs Data: Strength or Smoke and Mirrors?

The June jobs report showed 147,000 new jobs and an unemployment rate of 4.1%, but dig deeper and the cracks show. Over half of June's gains came from government hiring (state/local education, healthcare), while private-sector hiring stalled. The ADP report even recorded a loss of 33,000 private jobs—the first decline since 2023—due to businesses freezing hiring amid tariff uncertainty.

The Fed isn't blind to this. While they're holding rates steady now, a September cut could come if inflation cools further. But here's the risk: If tariffs keep pushing prices up, the Fed could pivot back to tightening—killing the rally cold.

The Geopolitical Wildcard

Israel-Iran tensions and the U.S.-China trade war are the twin engines of uncertainty. Energy markets are already twitchy—crude oil spiked 5% in May amid Middle East violence—and a full-blown conflict could send inflation soaring. Meanwhile, tech stocks (a key pillar of the S&P 500) face a double whammy: supply chain disruptions and slower global growth.

What to Buy (and Avoid) Now

The S&P 500's record highs aren't a reason to panic—yet. But investors need to pick their spots:

1. Tech & AI Leaders: Companies like NVIDIA and Microsoft are riding the AI wave. Even with trade risks, AI's long-term potential is undeniable.
2. Healthcare: Steady demand for healthcare services (see June's 39,000 new jobs here) and aging populations make this a “buy and hold” sector.
3. Avoid Consumer Discretionary: Tariffs are squeezing margins, and households are already cutting back on big-ticket items.

The Bottom Line

The S&P 500's record run is real—but it's also fragile. The Fed's next move, trade policy outcomes, and the private-sector jobs recovery will decide if this is a sustainable boom or a last hurrah. For now, stick with quality, dividend-paying stocks and keep a wary eye on Washington.

As I always say: Bulls make money, bears make money, but pigs get slaughtered. Don't let complacency turn this rally into a rout.

Data as of June 19, 2025. Past performance does not guarantee future results.