By early summer 2025, the U.S. stock market is breaking records again. The S&P 500 SPY–0.94% and Nasdaq Composite QQQ–0.89% are both printing fresh all-time highs, with tech stocks leading the charge in a rally that has added trillions in value to the market. At the heart of this explosive move are the so-called “Magnificent Seven”—Apple AAPL+0.66%, Microsoft MSFT–0.25%, Nvidia NVDA+0.72%, Amazon AMZN+1.41%, Alphabet GOOGL+0.58%, Meta, and Tesla TSLA+1.19% —who have collectively gained roughly $4.7 trillion in market capitalization since April 8.
But as the euphoria builds, investors are asking an important question: how long can this momentum last?
The Numbers Behind the Rally
Let’s start with the scale of this run. The Nasdaq QQQ–0.89% is up about 4.3% for the month, while the S&P 500 SPY–0.94% has climbed 3.4%. The gains aren’t just large—they’re fast. And a big part of the reason is that tech giants are doing the heavy lifting. Nvidia NVDA+0.72%, fueled by unrelenting demand for AI chips, alone accounts for a huge chunk of the Nasdaq’s gains QQQ–0.89%. Microsoft MSFT–0.25% and Apple AAPL+0.66% continue to benefit from enterprise tech spending and AI integration, while Meta META–0.80% and Alphabet GOOGL+0.58% are riding waves of advertising revenue and cost discipline.
Tesla TSLA+1.19% , which had a rocky start to the year, has staged a surprising comeback thanks to global EV demand stabilization and hints at breakthroughs in autonomy and battery innovation. Amazon AMZN+1.41%, for its part, is being rewarded for streamlining its operations and seeing renewed e-commerce and cloud momentum.
When you add it all up, the Magnificent Seven aren’t just outperforming—they’re driving the market. In fact, they’re responsible for more than half of the S&P 500’s SPY–0.94% gains in 2025. That kind of leadership is both inspiring and, to some, a little worrying.
Broadening Out—Or Not?
There are signs that the rally isn’t entirely confined to Big Tech. Market breadth, which measures how many stocks are participating in a move higher, is improving. Indicators like the NYSE Advance-Decline line are at record levels, suggesting that more sectors are joining the ride.
Industrials, materials, and even financials have been gaining ground. Defensive sectors like healthcare and utilities aren’t being left behind either, thanks to stable earnings and macro resilience. This sort of broad participation is typically seen as a healthy sign. It suggests investors are feeling more confident across the board—not just in a handful of megacaps.
Still, underneath the surface, the rally has its weak spots. Less than 55% of S&P 500 SPY–0.94% stocks are currently trading above their 200-day moving average. In previous bull markets, that figure was typically 65–80%. So while the headlines are dominated by new highs, the underlying foundation isn’t as firm as it might appear.
Macro Winds at the Market’s Back
Zooming out, several macroeconomic forces have supported the rally. For starters, a temporary truce in the U.S.–China tariff war has eased pressure on global trade. The Biden administration agreed to pause new tariffs for 90 days, buying time for negotiations and giving markets a psychological lift. This move also calmed inflation expectations, which is another plus for equities.
Meanwhile, geopolitical risks that haunted markets earlier this year—such as tensions in the Middle East—have taken a back seat. A ceasefire agreement and broader diplomatic efforts have reduced the “risk premium” that was keeping investors on edge.
Then there’s the Federal Reserve. After months of hawkish language, Jerome Powell and the Fed have softened their stance in response to softening inflation data. April’s Producer Price Index came in below expectations, and retail sales have been flat. This combination has fueled bets that rate cuts may arrive sooner than expected, especially if economic data continues to cool gently without tipping into recession.
Corporate earnings have also helped keep the rally alive. The first quarter of 2025 saw S&P 500 SPY–0.94% companies beat estimates by a wide margin—reporting year-over-year earnings growth of 13.7%, compared to consensus forecasts of around 8%. That kind of surprise provides fundamental support, especially for companies that were already priced for perfection.
Storm Clouds on the Horizon?
But even in a booming market, investors need to keep their eyes on the risks.
Valuations for the Magnificent Seven are now stretched. Some are trading at more than 30 times forward earnings, which historically tends to precede pullbacks unless growth continues at a breakneck pace. With so much capital concentrated in so few names, even a slight disappointment in earnings or guidance could rattle the broader market.
Another looming factor is the expiration of the tariff truce on July 9. If negotiations falter or tensions escalate, the return of trade penalties could reignite volatility. Meanwhile, the political calendar is heating up, with debates around the 2017 tax cut expirations and upcoming fiscal policy shifts adding uncertainty.
There’s also the issue of Q2 earnings. The market is expecting continued strength from tech, but expectations are now so high that even solid reports may not be enough. Investors will be closely watching how these companies navigate continued inflation, shifting consumer demand, and regulatory scrutiny.
And while hopes of a Fed rate cut remain high, the central bank has emphasized that it will be data-dependent. A surprise uptick in inflation or a stronger-than-expected labor report could delay cuts and reignite volatility across rates and equity markets.
So, What’s Next?
For now, the bulls are in control. The rally is broadening, supported by macro tailwinds, improving sentiment, and strong corporate performance. But cracks are visible if you know where to look.
This isn’t a bubble—but it’s a rally that demands vigilance. Investors should enjoy the ride but keep their eyes on earnings season, macro data, and policy moves. With valuations high and volatility lurking just beneath the surface, the next leg of the market’s journey will likely be more complicated than the last.
Still, for tech bulls and index investors alike, the first half of 2025 has been a reminder of just how powerful the sector can be—and how quickly market narratives can shift. Whether this surge leads to a sustainable bull market or a pause for breath will depend on what comes next: earnings, inflation, and decisions out of Washington.
In other words, enjoy the highs—but buckle up.
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