The S&P 500's All-Time High: A Bear Market Rebound or the Start of a New Bull Run?

The S&P 500 (^GSPC) has flirted with record highs in late June 2025, closing at 6,025.17 on June 19 and briefly touching 6,141.02 on June 26—just 0.05% below its February all-time peak. This near-record performance has sparked a heated debate: Is this a sustainable bull market revival, or merely a temporary rebound from a tariff-induced selloff? Let's dissect the technical and fundamental factors driving this rally—and the risks that could unravel it.

Technical Analysis: A Fragile Breakout?

The S&P 500's recent run has been marked by volatility. After plummeting 18.9% from its February 2025 high due to President Trump's “reciprocal tariff” policies, the index staged a 22% rebound in April 2025 following a 90-day tariff pause. However, the June 2025 highs have been accompanied by declining volume, a warning sign for momentum traders.

Crucially, the index has yet to close decisively above its February 2025 all-time high of 6,144.15. Technical analysts often view this as a psychological hurdle. If the S&P 500 can sustain a close above that level, it could signal a true bull market continuation. But if it fails, the pattern could mirror 2022's “dead cat bounce” after the Fed's rate hikes—a false start before a deeper correction.

Macroeconomic Fundamentals: Fed Policy and Tariffs

The Federal Reserve's stance remains a linchpin. While Chair Powell has hinted at a pause in rate hikes, traders now price in a 25-basis-point cut by year-end—a dovish shift that supports equities. However, inflationary pressures from energy and defense sectors (e.g., Kratos Defense's +80% surge) complicate this narrative.

The tariff truce has been a tailwind for sectors like tech and autonomous vehicles. Nvidia's 60% rally since April 2025 and Microsoft's new highs reflect this dynamic. Yet, the tariffs' return remains a Sword of Damocles. If trade tensions reignite, cyclical sectors like consumer staples and apparel (which fell sharply in April) could drag the S&P lower.

Valuation: Are We Overdue for a Pullback?

The S&P's price-to-earnings (P/E) ratio currently sits at 23.5x, slightly above its 20-year average of 21.5x. While not yet at dot-com bubble extremes, this premium is predicated on strong earnings growth—specifically from tech and AI-driven firms.

The problem? Earnings estimates for 2025 have been revised downward for 12 consecutive weeks, according to FactSet. The tech outperformance is masking broader weakness: energy and communication services sectors remain below their 2024 highs.

Key Catalysts and Risks

Catalysts for a Bull Run:
1. Fed Rate Cuts: A confirmed pivot to easing would remove a major headwind.
2. Tariff Resolution: A permanent rollback could unlock pent-up demand in cyclicals.
3. AI Earnings Surprises: Companies like Palantir (+80% YTD) and Microsoft have shown AI can drive top-line growth.

Risks of a Bearish Relapse:
1. Recession Signals: The yield curve inverted again in June, with 2-year Treasuries above 10-year notes—a historically reliable recession indicator.
2. Geopolitical Tensions: Middle East conflicts are spiking oil prices and defense spending, which could crimp consumer discretionary margins.
3. Valuation Squeeze: If bond yields rise (due to inflation), high-flying tech stocks could face multiple compression.

Actionable Insights for Investors

1. Sector Rotation: Favor defensive sectors (healthcare, utilities) if recession risks materialize.
2. Tech with a Grain of Salt: Own AI leaders (e.g., NVIDIA) but hedge with inverse ETFs (e.g., SDS) given their sensitivity to rate hikes.
3. Cash Reserves: Keep 10-15% of portfolios in cash to capitalize on dips. The June volatility (±3% swings) suggests pullbacks are buying opportunities.
4. Avoid Tariff-Exposed Stocks: Apparel and consumer staples remain vulnerable until trade policies stabilize.

Conclusion: A Bull Market in Disguise?

The S&P 500's near-record levels are neither a clear bull market nor a dead cat bounce—they're a hybrid. The tech-fueled rebound has legs, but macro risks are mounting. Investors should treat this as a “conditional bull market,” where success hinges on Fed easing and geopolitical stability. Until those conditions solidify, the path to new highs will be bumpy.

Stay vigilant, stay diversified, and don't mistake hope for fundamentals.

Joe Weisenthal is a pseudonymous contributor to this analysis.