The S&P 500 is close to reaching new record highs. The index has risen by 19.6% since its low on April 8. This rise was led by a 30.5% rally in the “Magnificent 7” stocks.
Goldman Sachs says the S&P 500 is only 3.1% below its all-time high of 6,144. Strong earnings and good positioning trends are seen as factors that could prevent a near-term drop. But there are also risks that could disrupt the upward trend.
These include a possible earnings miss from Nvidia, setbacks in U.S.-China trade talks, and a slowdown in retail buying. Macro hedge funds have also mostly finished covering their short positions, and foreign inflows are still low. Despite these challenges, market sentiment seems positive.
This is supported by momentum players and steady ETF flows. Investors are advised to stay committed to their positions but also stay alert. They should balance growth opportunities with the potential for event-driven volatility.
As the S&P 500 nears record levels, portfolios may need to shift towards growth sectors. Investors should also closely watch tech earnings and international trade news. Nvidia’s upcoming earnings report and U.S.-China trade discussions will be important indicators of whether the current rally can keep its momentum.
Investors are eagerly waiting for these developments. They know that they may provide key direction for the market’s next moves. The S&P 500 could soon return to record highs as sentiment improves, according to Bank of America.
For now, it seems stocks can’t be stopped. The S&P 500 made a small gain Monday, extending its winning streak to six days. This was after it reversed a decline caused by a Moody’s downgrade of U.S. debt.
The advance added to the benchmark’s rebound off the lows that followed the April 2 tariff announcement. Since reaching an April 7 intraday low, the index is up more than 23%. This was driven by easing tariff rates and improving investor sentiment.
Based on historical patterns, Bank of America suggests the S&P 500 might continue this upward trend. Bank of America noted that its Global Equity Risk-Love Indicator has rebounded from “deep panic readings” in early April back to neutral. Strategist Ritesh Samadhiya observed that the indicator has swung from panic to neutral 32 times in the last 38 years.
In only four of those cases did sentiment fall back into panic levels. In all other episodes, it rose further to euphoric levels. “Washed-out sentiment, followed by marked improvement in market breadth against a backdrop of monetary easing, has historically been associated with a continuation or formation of a new bull market.
While history is not a perfect guide, the weight of the evidence suggests that markets may continue to climb higher,” Samadhiya said. The S&P 500 ended Monday’s session just 3% below its record closing high of 6,144.15. Megacap tech, which has led the market rebound, could lose steam in the near term.
DataTrek Research co-founder Jessica Rabe noted that the iShares MSCI USA Momentum Factor ETF (MTUM) has outperformed the S&P 500 by 10 percentage points this year.
S&P 500 nearing new record highs
Historically, momentum has lagged the broader market index following periods of such strong gains.
“When Momentum has beaten the S&P by at least 10 points over any given 100 trading-day holding period, as it has just done, it has gone on to underperform by an average of 3.8 points over the next 100 days,” Rabe wrote. “Further, its win rate (positive forward 100-day returns/total) is just 19 percent.”
The outlook remains cautiously optimistic. This suggests that while megacap tech might see a cooldown, the overall market sentiment could propel stocks to new highs.
After a minor tariff-induced hiccup, the S&P 500 looks ready to continue last year’s stellar rally. Mark Hartley considers one AI stock driving growth. As of mid-May 2025, the S&P 500 sits just 3% below its all-time high of 6,144.15, set in February.
This resurgence has led analysts to revise their forecasts. Some recently raised their year-end target to 6,000, citing stronger-than-expected earnings and improved GDP growth projections. A marked increase in corporate earnings is the most significant driver of the market’s recovery.
In the first quarter of 2025, S&P 500 companies reported a blended year-over-year earnings growth rate of 13.6%. This surpassed the five-year average of 11.3%. It marks the second consecutive quarter of double-digit earnings growth.
Sectors such as Health Care, Communication Services, and Information Technology led the charge. The Health Care sector reported a remarkable 43% increase. Analysts anticipate this trend to continue, projecting a 14% year-over-year increase for 2025.
Technological developments like automation are significantly contributing to productivity and economic expansion. The AI phenomenon continues to play a significant role in US market activity. Companies like AI-chip makers remain at the forefront, with their performance closely watched by investors.
The ‘Magnificent Seven’ — tech giants — have been core drivers of the S&P 500’s gains. Investor confidence in the sector remains strong, as AI-enhanced automation continues to be integrated across various industries. This is leading to enhanced efficiency and new revenue streams.
This boost in corporate earnings could drive even greater market growth. The AI-driven analytics firm Palantir is a good example of an S&P 500 stock worth considering in 2025. It’s up a massive 65% since the beginning of April, after bouncing off a yearly low of $74.
It made a new record high on 14 May and is currently the second-best performing stock on the S&P 500, slightly behind Texas energy firm, ConocoPhillips. Known for its advanced data analytics and AI platforms, Palantir is capitalizing on surging demand from both government and commercial clients seeking to integrate artificial intelligence into decision-making. In Q1 2025, it posted its sixth consecutive quarter of profitability, along with a 21% year-over-year revenue increase.
The company is also aggressively expanding through higher-value contracts and pushing for more international adoption. However, it trades at a notable premium — around 55 times earnings. This high valuation leaves little room for error — any earnings miss or slowdown in growth could trigger a sharp correction.
Another concern is concentration risk: most of Palantir’s revenue comes from a small number of large government contracts, particularly with US defense and intelligence agencies. Delays or cancellations in these contracts could hurt its revenue and share price. Nevertheless, investor enthusiasm remains high due to its strategic position at the intersection of AI, defense, and enterprise software.
The company’s success is a good example of how the AI narrative extends far beyond semiconductor stocks like Nvidia.
