Stock market today: S&P 500 ekes out gain as Trump says open to deals on tariffs
Investing.com - Punishing tariffs, massive budget bills, violent air wars: The first half of 2025 featured a host of market-shaking events that have sent stocks rising, then tumbling, then jumping again.
The volatility continued right up until the final days of the opening six months of the year, with global equities rebounding to touch record highs.
"[I]nvestors have contended with shifting policy, swings in sentiment, and geopolitical events," analysts at UBS wrote in a note to clients. "Yet, beneath the surface, the outlines of a more constructive environment are forming."
The benchmark S&P 500 and tech-heavy Nasdaq Composite both notched new closing peaks this week, underpinned by hopes for a bevy of White House trade deals and signs that, even after a series of warnings about the economic consequences of President Donald Trump’s aggressive tariffs, the broader economy remains intact.
But major uncertainties still face investors, and could drive stocks in the months ahead, the UBS analysts flagged.
First, the trajectory of U.S. trade policy is unclear, with an expiration to a 90-day pause to Trump’s "reciprocal" tariffs now just days away. Markets are trying to decipher if the White House will approach this deadline by outlining a string of trade deals, extending the delay, or re-imposing elevated levies on a wide range of trading partners.
Trump’s signature policy bill is another key piece to the second-half puzzle. The giant collection of tax cuts and spending increases is estimated to expand the U.S. deficit and lift the country’s already-giant $36.2 trillion debt pile. However, tariffs and budgets are not likely to disrupt stocks for an extended period, the UBS analysts argued.
"Elevated tariffs and persistent deficits may periodically unsettle markets, but we do not expect them to end the broader economic expansion or trigger a sustained market drawdown," they wrote.
Meanwhile, geopolitical tensions are heightened, as a truce between Israel and Iran after a brief but bloody air war holds and fighting in Ukraine continues despite hopes for a possible ceasefire.
Investors must be ready to respond to "tail risks" presented by these events by effectively diversifying and hedging against their implications, the UBS analysts said.
How the Federal Reserve plans to approach policy in the coming months is yet another source of uncertainty. Some Fed policymakers have signaled a willingness to cut interest rates soon following a period of relatively benign inflationary pressures, but the central bank -- wary of the impact of Trump’s tariffs -- has largely taken a wait-and-see attitude to future rate actions.
UBS expects the Fed to cut again before the end of the year, leading a trend of tepid growth, slower price gains, and flows into safe-haven assets that will in turn spark a drop in high-grade bond yields.
The analysts also anticipated that the first half’s "de-dollarization" drive, which was highlighted by a sharp depreciation in the greenback and a flight into foreign currencies like the euro, will persist -- albeit at a more moderate pace.
Yet, even with these various factors in mind, the "structural" forces -- such as artificial intelligence and longevity -- that have pushed stocks up in recent years are tipped to continue to drive equity returns in the back-half of 2025.
"Against this backdrop, we recommend that investors align portfolios with these key drivers while managing the risk of renewed volatility," the UBS analysts said.