Now we are in the midst of a synchronised global bull run. To be sure, 2025 had been billed as the year when the US stocks would take a breather, with possibly a low single-digit return, letting laggards like Europe, Asia and Latin America catch up. The S&P 500 had a total return, including dividends, of 26.5% in 2023 and 25% last year. Donald Trump’s return to the White House and his aggressive trade restrictions, tariffs, domestic spending cuts and deportations of hundreds of thousands of illegal immigrants triggered a dramatic sell-off in US stocks just as markets elsewhere were starting to recover. By early April, the S&P 500 had plunged 19% to just over 4,835. “Investors may have overreacted to policy shifts in the US and geopolitical tensions,” in the Middle East, says Michael O’Keefe, chief investment officer for Stifel, Nicolaus & Co, a St Louis, Missouri-based investment bank. On July 23, the US stock barometer touched 6,401, over 32% higher from its April lows. “Animal spirits are proving to be a driving force,” O’Keefe says.
Goldman Sachs has one of the most conservative US growth estimates, projecting 1.1% gross domestic product growth this year. But that’s an outlier — far from the 1.5% GDP growth consensus on Wall Street. President Trump’s “One Big Beautiful Bill” provides near-term stimulative tailwinds, such as tax cuts, but also potential longer-term headwinds from the continued deficit and growing federal debt. Moreover, inflation remains close to the US Federal Reserve’s target despite worries about the tariff’s impact on consumer prices. Investors now expect most probably two quarter-point Fed rate cuts later this year.
When added to the tax cuts they are likely to kick-start growth in the US. Corporate earnings are forecast to grow 9% this year and 13% next year. US companies that bought back about US$942 billion ($1.2 trillion) in shares last year are expected to buy back US$1.2 trillion this year, based on announcements made so far. US corporate profits doubled to US$4 trillion last year from US$2 trillion 14 years earlier. Profits, which averaged 13.9% of US national income between 2010 and 2019, are now 16.5% of national income.
A big tailwind is the ongoing AI boom. Last year, hyperscalers such as e-commerce behemoth Amazon.com, Google’s parent Alphabet, Instagram’s parent Meta Platforms and software giant Microsoft spent US$199 billion on capital expenditures, mostly on AI chips from Nvidia, as well as building AI data centres. This year, they will spend US$288 billion, a figure that does not include Oracle or Elon Musk’s AI start-up xAI, which are spending about half as much as the hyperscalers. JP Morgan expects the AI infrastructure capex to grow to US$308 billion next year and US$331 billion in 2027.
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On July 23, Trump unveiled an ambitious plan to supercharge AI, with a sweeping road map to develop the technology, pledging to boost US innovation while stripping away what he described as “bureaucratic red tape” and “ideological bias”. His 28-page AI Action Plan outlines more than 90 policy actions for the rapidly developing technology that can be implemented over the next year. The plan promises to develop data centre infrastructure further and promote American technology. “We believe we’re in an AI race, and we want the US to win that race,” administration’s crypto czar David Sacks said after the plan was made public.
Rare global bull run
The AI boom is powering the latest US stock market rally. The biggest beneficiaries have been stocks of chip giants such as Nvidia and Broadcom, which plunged 37% and 42% respectively from their January peak. Shares of both firms have more than doubled since their April lows.
If you doubt that we are in a rare global bull run, have a look at what’s happening in major markets. The iShares Global 100 ETF, which tracks the top-listed stocks in the world by market capitalisation, is now at an all-time high. MSCI EAFE, the index that includes global stocks across Europe, Australasia and the Far East, also touched new highs this past week. The STOXX Europe 600, which comprises the largest European shares, is also at an all-time high. The Euro STOXX 50, the Dow of Europe, is at a record high. London’s FTSE 100 surpassed the 9,000 level for the first time on July 21, while the German benchmark Index DAX broke through all previous records last week and Toronto’s TSX set new records as well. Japan’s long-suffering barometer, the Nikkei 225 index, is making new highs, as is Australia’s ASX 200.
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Belgium’s BEL 20, Ireland’s ISEQ All-Share Index, Chile’s IGPA Index and the Mexican barometer IPC Index all hit their new record highs over the past week or two. Others, such as the OMX Stockholm 30, France’s CAC 40 and South Korea’s Kospi, are just 3% to 4% away from their all-time highs. Milano Indice di Borsa was trading at 17-year highs last week, Portugal’s PSI 20 is at its highest in nearly 15 years, Austria’s ATX is at its highest level since 2008, Spain’s ES35 is at its highest in 17 years and Greece’s Athex Composite Index is at its highest in 14 years. Singapore’s Straits Times Index also hit its all-time peak this past week.
Why would anyone invest when markets are at an all-time high? An all-time high is never a sell signal, just as an all-time low isn’t an indicator to buy stock. The S&P 500 hit all-time highs 57 times last year, despite only 251 trading days. That means the market hit a new high every fifth trading day. This year, the market barometer has reached a new high 14 times, and we have had approximately 145 trading days.
More than 82% of the S&P 500 firms that have reported so far have beaten analysts’ estimates, ahead of the five-year average of 78% that beat estimates. Yet it is still early days in the earnings season. The game played on Wall Street goes like this: Analysts quietly lower earnings estimates when they realise the earnings may miss or the beat might not be meaningful, allowing companies to clear a new low bar easily and giving investors a reason to applaud. Everybody knows what is being played is a charade.
There is good news from tariffs. After scaring trading partners with hefty tariffs that triggered April’s market plunge, Trump pivoted to a different strategy. He has begun cutting deals with large partners and tariff rates aren’t as high as feared. The US recently signed a deal with Japan, claiming it would levy tariffs of up to 15% on Japanese goods. Indeed, Ford and GM vehicles assembled wholly or partly in Canada or Mexico have 25% tariffs, while Toyota and Honda cars will only have 15% tariffs. Trading partners are happy to let Trump claim whatever high number he wants to as long as the goods they ship are subjected to lower tariffs. The president sees tariff boasts as a way to mollify his MAGA base, which is angry with the stalemate over the release of sex trafficker Jeffrey Epstein’s files.
So, are we in a bubble that could pop at any moment now? The last five-year average earnings multiple works out to around 19.9 times and the 10-year average for 12-month forward earnings is 18.4 times. At the height of the dot-com bubble in March 2000, the S&P 500’s forward earnings multiple was around 34 times. Consensus estimates of S&P 500 earnings for 2025 are currently around US$265, down from US$275 earlier in the year. Earnings are now forecast to grow over 13% next year to US$300. The market is trading at 23.9 times this year’s earnings and 21.19 times next year’s. Tech stocks in March 2000 were trading at a whopping 48 times earnings; right now, they are trading at around 31 times this year’s earnings. How does the current tech darling, chip giant Nvidia, compare with networking gear maker Cisco, the icon of the dot-com boom in 2000? Cisco stock in March 2000 was trading at 157 times that year’s earnings, while Nvidia is currently trading at 34.7 times this year’s earnings.
Why would anyone buy American stocks now? Have foreigners not been selling US stocks, including tech stocks, taking the money lock, stock, and barrel to Europe and Asia? Overseas investors still own over US$26 trillion of US assets, approximately half of which is in shares in US firms. The US Treasury’s latest data shows foreign investors have been steadily increasing their holdings of US equities. As of the end of May, they owned 18% of all US-listed shares, the highest level in history. At the height of the dot-com bubble, just 7% of all US shares were owned by foreign investors. Asia’s US portfolio holdings at the end of last year were around US$4.8 trillion, having more than doubled since 2009. “Foreign ownership of US assets is the mirror image of a trade deficit,” notes Torsten Slok, chief economist at Apollo Global Management, the world’s largest manager of alternative assets. “Foreigners selling goods to the US receive dollars in return, which are then used to purchase US assets, including US equities,” he wrote in a recent note.
Market strategists who rushed to slash their 2025 Index targets drastically in the aftermath of the “Liberation Day” tariffs in April have begun revising their targets upward again in recent weeks. The S&P 500 is up 8.4%, or 9.2% if you add in dividends, while the tech barometer Nasdaq 100 Index is up 10.5%. Some of the index targets for the S&P 500 that had been cut to 5,900 in April have since been raised to as high as 7,100. If the market reaches that level, it would be 22% higher for the year, including dividends, or up a cumulative 93% since January 2023.
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Still, the S&P 500’s performance is likely to lag behind that of many international bourses this year; however, its longer-term performance will help reinforce America’s position as the world’s premier stock market and the key magnet for high-growth, risk-taking, innovative companies and global capital. The rally has been broadening out to a far larger range of listed companies away from tech giants. Data from giant retail brokerage Charles Schwab shows that retail investors have been net sellers of tech stocks lately. The biggest buyer: institutional investors who had sold in April and are now clamouring to get back in.
Party like it’s 2021
Over the past week, the rally has spread to forgotten companies that have morphed into meme stocks in a mania, reminiscent of the February 2021 bull run in stocks such as GameStop. Fallen angels like property tech firm Opendoor Technologies, retailer Kohl’s, doughnut maker Krispy Kreme, and plant-based meat firm Beyond Meat, whose stocks plunged 85% to 95% from their 2021 peak, had been left to die until retail investors’ buying spree sent them soaring. Investors just need to be mindful that bear and bull markets have just one thing in common: they ultimately come to an end.
Assif Shameen is a technology and business writer based in North America
