If “tariff” isn’t the word of the year for stock investors so far, then perhaps it’s “uncertainty.” Uncertainty around trade policy dominated the path of the stock market in the first half and will continue to play a large role in thecsecond half. Tariffs influence the key drivers of stock market performance: economic and corporate profit growth, inflation, and interest rates. If stocks continue to move higher in the second half of the year, trade policy will need to cooperate. Meanwhile, geopolitics remain a wildcard. Here we provide our midyear stock market outlook, taken from Midyear Outlook 2025: Pragmatic Optimism, Measured Expectations.

Historical Perspective

Using history as a guide, the unusually sharp and swift “V-shaped recovery” from the April 8 S&P 500 Index low was one of the most powerful post-correction rebounds in stock market history. The S&P 500 has rallied 15% or more in 28 trading days or less 11 other times since 1950, as it did from April 8 through mid-May. Subsequent 12-month returns for the index after these occurrences have averaged 26%, with all 11 periods producing positive returns, though past performance does not guarantee future results. But before you expect that much upside, consider most of these periods immediately followed recessions or significant growth scares — hardly the environment we are in today.