June, 2025 — U.S. equities are on the verge of setting new records, buoyed by easing geopolitical tensions, resilient economic growth, and a resurgence of optimism around artificial intelligence. Despite a turbulent backdrop involving tariffs and recent conflict in the Middle East, market sentiment remains firmly constructive.

Following a ceasefire in the region, fears of energy price shocks have subsided, offering relief to investors wary of inflationary pressure. The S&P 500 is now just 2% below its all-time high, recovering strongly from its April lows.

Resilient Market Structure

Despite recent missile activity in the Gulf, trading remained orderly, according to a Goldman Sachs trading desk note, with “more offense than defense” characterizing investor behavior. Market reaction to geopolitical developments appears to be a “clearing event”, allowing equities to continue their upward trajectory.

At the same time, equity bulls may still have dry powder. Fundamental investors have not yet significantly increased their exposure since the April rebound, leaving room for further allocation into risk assets. Additionally, retail traders, option flows, and systematic funds continue to influence market direction, although the latter may be reaching a saturation point in long positioning.

AI-Fueled Momentum

Artificial intelligence remains a major theme, with AI-linked stocks hitting all-time highs. While broader benchmarks consolidate, the AI sector demonstrates the kind of upside leadership that could re-energize the overall market — mirroring patterns seen over the past two years.

Cooling Inflation, Tariff Watch Ahead

Oil prices have receded quickly following the geopolitical de-escalation, reducing immediate inflation risks. However, President Trump’s upcoming July 9 tariff deadline looms large. Analysts suggest that a pause or potential trade deals could add significant upside optionality for markets.

Looking ahead, Q2 earnings will also take center stage. S&P 500 earnings per share are projected to rise by 2.8% year-over-year, but investor focus will remain on forward guidance, particularly in how companies are navigating global trade and capital expenditure cycles.

Despite macro uncertainties, the market appears to be entering a “blue-sky” scenario, where improving geopolitical conditions, steady economic data, and renewed tech optimism provide fertile ground for continued equity gains. With systematic selling pressure low and a positive outlook on AI and trade, the path of least resistance may be higher — at least for now.