In the Second Half of the Year, Stocks Are at All-time Highs, and a Jobs Report is Expected

The upcoming week marks not only the start of a new trading month but also the beginning of the second half of 2025, and investors are keen to see if the stock market can maintain its recent upward momentum.

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After a sharp selloff in April—triggered by concerns surrounding President Donald Trump’s aggressive tariff measures—the stock market has staged a significant recovery. At its lowest point, the S&P 500 came dangerously close to entering bear market territory. But optimism about potential trade deals with China and other key partners helped lift sentiment.

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On Friday, the S&P 500 even notched a new intraday record, although it later surrendered most of those gains after President Trump abruptly ended trade negotiations with Canada.

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Despite some lingering volatility, the market is closing out the first half of 2025 on a strong note. The S&P 500 and the Nasdaq Composite have each gained more than 4% year-to-date, while the Dow Jones Industrial Average is up more than 2%.

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Some market experts, like BlackRock’s Rick Rieder, believe that this rally could have even more room to run in the second half of the year. Speaking at the Morningstar Investment Conference this past week, Rieder pointed to the transformative impact of artificial intelligence as a potential driver of lower inflation and stronger market performance.

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Historically, July has been a robust month for the markets, offering hope for continued gains. Over the past decade, the S&P 500 has posted positive returns in July every year, making it the index’s best-performing month over the last 20 years, according to Ryan Detrick of the Carson Group. Notably, July also tends to do especially well in post-election years.

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Detrick told CNBC on Thursday that the market’s strength in May and June is setting up for a potentially explosive July, calling it a time for “fireworks.” He noted that when the market performs well in the late spring months, it often gains momentum heading into the summer. “The final six months of the year have risen 15 out of the last 16 times under similar conditions,” he said, suggesting that the current bull market still has legs.

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Still, not everyone is convinced that July will bring smooth sailing. A key point of concern is the looming July 9 expiration of President Trump’s 90-day tariff pause. Although the White House has downplayed the significance of the deadline—saying it’s “not critical” and could be extended—the uncertainty surrounding it could inject volatility into the markets.

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Andrea Ferrario of Goldman Sachs cautioned in a note Thursday that macroeconomic and policy uncertainties remain elevated, suggesting that stock market volatility could stay high in the second half of the year. She identified the July tariff deadline as one of several potential triggers for market swings.

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Additionally, there’s growing concern that current stock valuations may be stretched. The S&P 500 is currently trading at a price-to-earnings (P/E) ratio of 23.3, according to FactSet. For comparison, the forward P/E at the height of the dot-com bubble in 1999 was 24.4. Nick Colas and Jessica Rabe of DataTrek noted on social media that bullish bets on large-cap U.S. stocks would need to assume a return to those 1999-style valuations.

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However, they also pointed out that today's market environment is more supportive than it was in 1999. With potential rate cuts, cheaper oil, and a heavier technology weighting in the S&P 500, they argued, “current valuations reflect a full glass of optimism,” but not without reason.

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The market’s ability to move significantly higher from here could depend on continued economic stability, said Anthony Saglimbene, chief market strategist at Ameriprise. He emphasized that employment data will be particularly important in shaping investor expectations.

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With U.S. markets closed next Friday and observing a shortened session on Thursday due to the Fourth of July holiday, a raft of economic reports is scheduled to be released Thursday morning. Among the most anticipated is June’s nonfarm payrolls report. Economists surveyed by Dow Jones expect to see job growth of 115,000, a slowdown from May’s 139,000 increase.

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Saglimbene told CNBC that jobs data is key to understanding consumer behavior. “The only time that consumers really cut back spending is when they worry about losing their jobs or already have,” he said. “If employment holds steady, consumer spending likely remains resilient, which bodes well for the economy—even with all the uncertainty surrounding tariffs and trade negotiations.”

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As the second half of 2025 kicks off, the market is in a strong position but still faces important hurdles. Investors will be closely monitoring economic indicators, trade developments, and Fed policy for signals that could determine whether this rally has more room to grow—or if a reversal is on the horizon.

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