The S&P 500 Hits a Record High After Rallying by $10 Trillion

Asian markets were poised for gains after global stocks hit a record high on Thursday, thanks to easing geopolitical tensions and growing investor confidence that the Federal Reserve will cut interest rates later this year.

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Futures for stock indexes in Japan, Australia, and Hong Kong were all trading higher early Friday. This followed a solid performance in the U.S. where the S&P 500 rose 0.8%, approaching its all-time high. Meanwhile, the Nasdaq 100 advanced 0.9%, helping push the MSCI global equity index to a fresh peak. U.S. equity futures also saw modest gains heading into Friday.

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Investor optimism was reinforced by a broad rally in U.S. Treasuries, reflecting heightened expectations for rate cuts by the Fed. The interest rate swaps market now fully anticipates two more reductions in borrowing costs this year, and on Thursday, expectations for a third cut began to build.

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Paul Stanley of Granite Bay Wealth Management noted, “Stocks are climbing back to record levels as key uncertainties fade. Investors are feeling more confident as Middle East tensions ease and progress is made on the trade front.”

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Supporting the outlook for easier monetary policy were weaker U.S. economic indicators. Consumer spending in the first quarter expanded at its slowest pace since the early days of the pandemic, and GDP growth was revised down to an annualized 0.5%. Meanwhile, continuing jobless claims rose to their highest level since 2021, although new claims declined slightly.

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The dollar weakened Thursday as Treasury yields dipped, boosting the Japanese yen and lifting emerging-market currencies for a third consecutive day. West Texas Intermediate crude gained 0.5%, its smallest movement all week, pointing to increased stability in the Middle East.

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These cross-market developments suggest investors are starting to focus more on central bank policy and the overall health of the U.S. economy rather than short-term risks such as trade tariffs or regional conflicts. Adding to the positive sentiment, U.S. Commerce Secretary Howard Lutnick said after markets closed Thursday that the U.S. and China had reached a consensus on trade following recent discussions.

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Nonetheless, volatility is expected to stay elevated through the second half of 2025, according to Goldman Sachs strategists led by Andrea Ferrario. They warned that risks tied to inflation from tariffs and broader macroeconomic uncertainty could still pose challenges for investors seeking stability in diversified portfolios.

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In a related development, the U.S. Treasury reached a deal with its G-7 partners that will exempt American firms from certain foreign taxes. In return, the U.S. agreed to drop a proposed “revenge tax” from President Trump’s legislative package.

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In Asia, key economic releases on the calendar include Japan’s Tokyo-area inflation figures and retail sales, trade data from the Philippines, and China’s industrial profit numbers. Markets in Indonesia and Malaysia were closed for holidays.

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On the topic of U.S. interest rates, several Federal Reserve officials have reiterated this week that more time is needed to assess whether tariff-related price increases could cause lasting inflation. San Francisco Fed President Mary Daly said in a Bloomberg interview that while she sees signs tariffs may not have a long-term inflationary impact, she would only be open to a rate cut in the fall.

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Similarly, Richmond Fed President Tom Barkin expressed concern that tariffs might still push prices higher and argued that the Fed should hold off on policy adjustments until more clarity emerges. Boston Fed President Susan Collins echoed a cautious stance, suggesting one cut might be warranted this year, but likely not as early as July.

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Economists forecast that the Fed’s preferred inflation measure — the core personal consumption expenditures (PCE) index, which strips out food and energy — rose just 0.1% in May. That would represent the mildest three-month inflation period since the pandemic began.

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Haris Khurshid, chief investment officer at Karobaar Capital, observed, “The market is banking on inflation continuing to cool and the Fed starting to ease soon. A soft PCE reading would reinforce that narrative. But if economic growth remains sluggish or earnings disappoint, this rally might quickly lose momentum.”

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Market Snapshot:

Stocks:

• S&P 500 futures were little changed as of 7:24 a.m. in Tokyo
• Hang Seng futures were flat
• S&P/ASX 200 futures gained 0.6%

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Currencies:

• Bloomberg Dollar Spot Index fell 0.5%
• Euro was stable at $1.1692
• Yen held steady at 144.48 per dollar
• Offshore yuan was little changed at 7.1627 per dollar
• Australian dollar hovered at $0.6547

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Cryptocurrencies:

• Bitcoin dipped 0.6% to $107,168.20
• Ether fell 1% to $2,420.86

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Commodities:

• West Texas Intermediate crude rose 0.3% to $65.41 a barrel
• Spot gold slipped 0.2% to $3,322.04 an ounce

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Overall, markets appear to be gaining momentum, driven by optimism around easing inflation, upcoming Fed cuts, and a de-escalation of global tensions. However, investors remain cautious about the broader economic backdrop and the potential for setbacks in growth or earnings.

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