US500

Wall Street continues to rally above 6,235 points in terms of the S&P 500 broad market barometer. Our team of analysts is expecting the index to hit 6,500 or even 6,850 points within the rest of the year, and here is the time when drivers of optimistic sentiment are coming one after another to build up bullish momentum further. Markets are badly apolitical by nature, it's all about money and more money. But when political tensions are going to give birth to clearly economic reasons, even hardened cynics sometimes knee under this kind of pressure.

The spring of 2025 brought a perfect storm of tariff wars, nearly closing doors for cross-border trade and global recession prophecies, all accompanied by the Federal Reserve's stark rebellion against cutting interest rates. This caused many equity prices to fall by 20-25%, but yet provided excellent buying opportunities for those, who quickly realised all those worries were just yanking out mental chains. Congrats to all now that we are 30% above April's 4,800+ dips, and this summer grants us what we would call the opposite side of a perfect storm: a set of external reasons that together create an exceptionally favourable economic environment. Let's briefly name these advantages.

U.S. president Donald Trump eventually strikes a trade deal with Vietnam, imposing only a 20% tariff on all goods sent to the U.S., instead of threatening three times higher trade barriers since April, with a 40% tariff on any transhipping. In exchange, Vietnam granted the U.S. "total access" to its markets with zero tariffs on most American products. The deal was announced on Wednesday, July 2, to become the third big one after cherished agreements with the U.K. and China ahead of a July 9 likely “movable” deadline. We don't think anyone needs detailed explanations on how important this is for international supply chains, helping to maintain business profits and cooling inflation fears. It's especially good news for retailers and chipmakers, of course, but it will have a positive impact on everyone, including investors and non-investors, i.e. billions of ordinary consumers.

U.S. fiscal bill torture which previously created moderate market sweeping is over as well. The "Big Beautiful Bill", or simply BBB, passed the Senate successfully on July 1. Markets don't care that the BBB passed by a mere 51-50 vote, with the intervention of a decisive voice by vice president J.D. Vance, that a few of the less stable opposition senators insisted on reading the entire 940-page document aloud first, which took 16 hours, and then succeeded in getting it banned from being presented as a "Big, Beautiful Bill", considering this to be pressure on the reasons for the vote. Politics is the art of the possible, and the way the bill was pushed through is how it turned out. What's important to investors is that the bill supports dramatic taxes cuts for companies, some of them from 35% to 21%, which benefits not just the rich, but the entire economy, including the profits of large and small businesses, and the cash wallets of workers and consumers. Tax breaks for interest payments on auto loans up to $10,000 annually will support the auto industry, and tax credits for tips and especially overtime pays (up to $25 thousand and $12.5 thousand, respectively) will support many manufacturing and service segments.

As to increasing the U.S. debt ceiling by $5 trillion over 10 years, this can be considered a very moderate compromise that could hardly have been avoided, although many would like to freeze the national debt or start gradually paying it down, of course. But these are mostly dreams, which could be considered by the next Congress in 2027 or even some next U.S. president after 2030. No politician nowadays is ready to take such a decision. This decision from the summer of 2025 will also bring much more clarity to investors who did not understand what they could expect for U.S. Treasuries, and now demand for the U.S. debt would be stabilizing. More stability in the inflows of capital is more likely to allow the Federal Reserve to resume its previously stopped rate cut cycle.

Reducing inflation fears through the above-mentioned trade deals will help much. Reducing some excessive social benefits, according to the BBB - for those who are not trying to get a job - will be another additional factor to lower inflation expectations. The prospect of defeating highly inflated inflation expectations could break the back of the Federal Reserve hawks, and so Goldman Sachs already pulled forward its fresh forecast for the next Fed rate cut move from December to September. We will still have plenty of time and reasons during this summer to talk about the Fed's plans, and we will definitely do this, but now the only important thing is that the vector of expectations for borrowing costs is pointing downwards. And this is not the major driver, but yet another important factor contributing to what we could be characterised as "the opposite side of a perfect storm" to help the bulls in the U.S. stock market.