S&P 500 hits new highs again, has the bull market taken hold?

   Entering the summer of 2025, the US stock market is exciting again. The S&P 500 index recently broke through its historical high, followed by the Nasdaq, and many large technology stocks and heavyweight stocks set new records. Investors have begun to discuss a key question: Is the current bull market on its feet, or is it just another short-lived optimistic bubble?

This article will analyze the nature of this wave of rising market from four dimensions: market drivers, macro background, investor psychology, and potential risks, and try to determine whether this is the beginning of a real bull market, or whether a rational correction in an overheated market will come sooner or later.

1. The S&P 500 hits a new record high again, who is the leader?

As of mid-June, the S&P 500 index rose above 5,400 points, with a year-to-date increase of more than 14%. The core driving force behind this wave of market still comes from technology giants and artificial intelligence-related companies:

NVIDIA's market value has exceeded the 4 trillion US dollar mark, becoming the "growth engine" in the market;

Microsoft and Apple maintain a steady performance, and continue to attract money with the help of AI services, cloud computing and hardware upgrades;

Platform companies such as Meta and Amazon continue to hit new highs against the backdrop of a rebound in advertising and consumer data.

In addition, traditional sectors such as energy, finance, and industry have also begun to "catch up", showing that the market is not entirely dependent on technology alone, but has a wider participation, reflecting a certain "healthy rotation".

2. The Fed's policy is still the biggest variable, but the market is confident

After more than a year of high interest rate environment, inflation indicators have finally shown substantial improvement. The latest CPI annual growth rate has dropped to 3.2%, and core inflation is also slightly lower than market expectations.

Although the Fed has not cut interest rates yet, the market generally expects that a moderate easing cycle will be launched as early as the fourth quarter of this year.

Although Fed Chairman Powell recently emphasized in a congressional hearing that "the fight against inflation is not over", he also admitted that there are risks in excessive tightening. This is interpreted by the market as: "Although there is no rush to cut interest rates, it will not cause the economy to fall into recession."

The expectation of stable interest rate policy is the key support for the continued rise of the current bull market.

3. Economic data supports moderate expansion, and expectations of "soft landing" are strengthened

The US GDP increased by 2.1% in the first quarter of 2025, slightly lower than the same period last year, but still maintained positive growth. The job market remains stable, the unemployment rate is controlled at around 3.8%, and the number of initial unemployment claims remains at a historical low.

Consumer spending has slowed slightly, but it remains resilient driven by the recovery of the service industry and tourism.

The ISM manufacturing index has returned to the expansion range for three consecutive months, indicating that corporate confidence has rebounded and capital expenditures have begun to recover.

These data reinforce the view that "the economy will not fall into a hard landing" and provide fundamental support for the stock market.

4. Investor sentiment is heating up, and FOMO reappears?

According to a fund manager survey by Bank of America (BofA), more than 60% of institutional investors believe that the current market is in the "early bull market stage", while the proportion of bearishness has dropped to the lowest level in nearly two years. Funds are clearly flowing back to US stocks, especially the S&P 500 ETF (such as SPY), which has seen a clear buying wave.

At the same time, retail investors are also returning to the market. The activity of platforms such as Robinhood and eToro has increased significantly, and many social media platforms have re-emerged with "FOMO (fear of missing out)" sentiment, especially on themes such as AI, semiconductors, and green energy.

However, while sentiment is warming up, it also means that the market is more sensitive to negative news. If any economic or policy data is unexpectedly negative, it may quickly trigger a wave of profit-taking.

5. Potential risks still exist, and the road to the bull market is not smooth

Although the current market atmosphere is optimistic, investors still need to pay attention to the following potential risks:

Risk of inflation rebound

Although inflation has fallen recently, there are signs of rising oil and raw material prices. If energy prices soar in the summer, it may suppress consumer spending and delay the timetable for interest rate cuts.

Corporate profit expectations are too high

The market's growth expectations for large technology stocks are currently very optimistic. Once the financial report is not as expected, I am afraid that the stock price correction will be significant.

International geopolitical risks

Including the situation in the Middle East, the Russian-Ukrainian war, and the US-EU trade relationship, which may suddenly heat up and disrupt the market rhythm.

6. Investment strategy: follow the trend and retain flexibility

For the current market environment, the following are some suggestions for European and American investors:

Hold core assets but do not blindly chase highs

Technology and AI leaders still have growth potential, but should avoid chasing high stocks with excessive short-term gains. It is more stable to deploy on dips and adjust positions regularly.

Allocate a balanced combination of defensive and cyclical stocks

Pharmaceuticals and utilities can hedge the volatility of highly valued stocks; cyclical stocks such as finance and industry are expected to catch up during the economic expansion period.

Pay attention to the dynamics of the Federal Reserve and adjust positions flexibly

If the interest rate cut is delayed this year, market sentiment may fluctuate. Pay attention to monthly employment and CPI data as early response indicators.

Moderately deploy overseas and emerging markets

European and American markets are already running at high levels. Moderately allocating emerging markets or economic growth stocks such as Japan and India will help diversify risks and increase return flexibility.

The new high of S&P 500 has undoubtedly brought confidence and motivation to investors. Judging from economic data, corporate profits, policy expectations and market structure, this wave of rise has a certain basis. However, whether the bull market has been fully confirmed requires observing the sustainability of funds and the stability of fundamental support.

Now is the time to enjoy the fruits of the market while preparing for future fluctuations. Being cautious in optimism and leaving room for opportunities is the most stable way to survive in the bull market.