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Risk On?

September 22, 2025

Time to Read: 2 minutes

The S&P 500 is trading at record highs, which some investors didn’t see coming after the tariff-fueled drop in April. What may come as a bigger surprise, however, is that the rally is broadening beyond big technology companies. Let’s examine different measures that prove this point.

Ever since early April, when policy uncertainty took the market down around 20%, equity indices have been gaining, hitting all-time highs with notable frequency. The S&P 500 is now around 13% year to date, which some investors didn’t see coming. What may come as a true surprise, however, is that the rally is broadening beyond big technology companies.

Cyclicals are outperforming defensive sectors, indicating that investors are becoming more positive on the outlook. Additionally, high beta stocks — or those that tend to experience larger price swings — are at a year-to-date high compared to the overall market, as measured by the S&P 500. When high beta stocks outperform, it typically signals the market is becoming more bullish. Consumer discretionary is leading staples, suggesting the consumer can remain resilient despite slowing job growth. Lastly, the equal-weighted technology sector is outperforming the average stock. This means technology stocks other than the Magnificent Seven are performing well too, implying a more diversified constellation of companies is gaining.

Together, these signals demonstrate that the market is more positive on the forward outlook. Slowing job growth remains a risk, and we will watch closely in case it spills over into consumer spending. Nonetheless, we believe equities can continue to move higher as the Federal Reserve eases into an improving earnings environment.

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Is the Job Market Stabilizing?

After sluggish job growth in 2025, investors are looking for signs that the labor market may be stabilizing. With consumer spending driving 70% of economic activity, an improving labor market is essential to sustaining economic growth.

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Will Markets Remain Resilient?

Global equities have risen an annualized 11% since 2020 despite repeated shocks, as resilient growth and earnings have helped markets recover from periods of volatility. While the U.S.-Iran conflict poses near-term inflation and growth risks, markets remain constructive as earnings expectations continue to improve.

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Earnings Breadth Still Improving

Rising earnings estimates continue to support equities despite geopolitical and macroeconomic uncertainty. With profit growth broadening across S&P 500 industries, resilient corporate earnings underpin our constructive outlook for the stock market.

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Global Momentum in Manufacturing

April PMIs (purchasing managers’ indices) point to a meaningful improvement in global manufacturing momentum, with the U.S., Eurozone and Japan all posting stronger-than-expected and firmly expansionary results. The breadth of the rebound suggests improving global demand, supporting our constructive outlook outlook for growth despite ongoing geopolitical tensions.

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