<p>According to Zhitong Finance APP, on July 1st, New York time, the U.S. stock market's performance in the first half of 2025 has been like a roller coaster, creating historical highs, but multiple uncertainties are casting a shadow over the market for the second half of the year. Although the S&amp;P 500 index has maintained a gain of over 5% this year, the market panic triggered by the &#34;tariff storm&#34; of the Trump administration in April still lingers. Currently, investors are holding their breath and focusing on six key variables that may determine whether U.S. stocks can maintain their current high levels.</p>
<h2>Will tariffs have an impact? Or will they only serve as a deterrent?</h2>
<p>The foremost concern remains the direction of tariff policies. Although market worries about the most extreme scenarios have eased, the critical date of July 9 is approaching, and the results of trade negotiations between the U.S. and multiple countries may trigger a new round of market volatility. Goldman Sachs' latest calculations show that even if some harsh tariff measures are lifted, the implemented policies have already pushed the U.S. effective tariff rate from 3% at the beginning of the year to 13%, which may continue to elevate inflationary pressures and erode corporate profits. The second-quarter earnings reports, set to be disclosed later this month, will serve as an important litmus test, with data indicating that S&amp;P 500 constituent earnings are expected to grow by 5.9%. Investors will closely monitor how companies digest tariff costs.</p>
<h2>When will the Federal Reserve cut interest rates?</h2>
<p>The Federal Reserve's policy path also stirs market nerves. Jerome Powell recently made it clear that the inflation risks triggered by tariffs are an important consideration for delaying interest rate cuts, yet the interest rate futures market is still betting on three rate cuts before the end of the year, with the first cut possibly occurring in September. Notably, the Trump administration is brewing a change in leadership before the Federal Reserve Chairman's term expires in 2026, and this personnel game may exacerbate market volatility. The non-farm payroll report for June, to be released this Thursday, will be a key indicator; any signs of weakness in the labor market could alter rate cut expectations.</p>
<h2>Have large tech companies regained control?</h2>
<p>The market style switch is also worth noting. After a pullback at the beginning of the year, tech stocks are once again dominating the market, with the S&amp;P 500 technology sector leading with a 15% increase in the second quarter, and the seven major tech giants contributing nearly 40% of the index's gains. This concentration raises concerns: equal-weight indices like the S&amp;P 500 have only risen by 4% during the same period, indicating that most stocks have not kept pace with leading companies. Brent Schutte, Chief Investment Officer of Northwestern Mutual Wealth Management, pointed out that for the market to continue its upward trend, broader participation is necessary.</p>
<p><img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250701/1751367593461603.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250701/1751367593461603.png"/></p>
<h2>How high can stocks go?</h2>
<p>Valuation pressure cannot be ignored either. With the S&amp;P 500 index reaching its first closing high since February last Friday, its forward price-to-earnings ratio has risen to 22.2 times, far exceeding the long-term average of 15.8 times. Investors are turning their attention to profit expectations for 2026, with current estimates suggesting that S&amp;P constituents' profits will grow by 14% next year; whether this growth rate can be realized will be key to supporting valuations. Meanwhile, the direction of the 10-year U.S. Treasury yield is crucial; if fiscal stimulus measures raise concerns about deficits and lead to soaring yields, stock market valuations will face significant pressure</p>
<h2>Will concerns about &#34;American exceptionalism&#34; weaken the stock market?</h2>
<p>Deeper worries lie in the fading of &#34;American exceptionalism.&#34; The tariff storm ignited by Trump in April has shaken global investors' confidence in U.S. assets, with the dollar index recently falling to a three-year low, and U.S. stocks underperforming compared to other major global markets this year. The relatively low valuation advantage of non-U.S. stock markets is prompting funds to reassess regional allocation strategies.</p>
<h2>Will geopolitical issues become a risk again?</h2>
<p>Geopolitical risks hang like a sword of Damocles. Recent fluctuations in the Middle East situation have briefly driven oil prices higher, and Barclays strategists warn that if conflicts escalate and disrupt crude oil supply, prices could break $100 per barrel, triggering a chain reaction. Although historical data shows that geopolitical crises have limited long-term impacts on U.S. stock returns, short-term volatility is still inevitable.</p>
<p><img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250701/1751367681459052.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250701/1751367681459052.png"/></p>
<p>In this market game intertwined with multiple variables, investors need to be wary of known risks such as tariff negotiations and Federal Reserve policies, while also leaving room to respond to geopolitical black swan events. As the market demonstrates, whenever seemingly solid upward logic is challenged, new variables always emerge to rewrite the script</p>

.SPX

<p>The U.S. stock market reached a historic high in the first half of 2025 but faces multiple uncertainty factors that may affect the trend in the second half. Investors are focusing on six key variables, including tariff policies and the Federal Reserve's expectations for interest rate cuts. Although the S&P 500 has maintained an increase of over 5% for the year, concerns about tariffs and inflation remain. The upcoming second-quarter earnings reports and the June non-farm payroll report will serve as important market indicators</p>

- The U.S. stock market in the first half of 2025 has experienced significant volatility, reaching historical highs but facing uncertainties that may impact the second half.  
- Key factors include tariff policies, inflation risks, and the Federal Reserve's interest rate decisions, with upcoming earnings reports and employment data expected to influence market sentiment.  
- Additionally, geopolitical tensions and the valuation pressures on stocks are raising concerns about the sustainability of the current market rally.

Zhitong

Beware! The US stock market hits a historic high but cannot hide concerns; the performance in the second half of the year faces six major variables