The S&P 500 and Nasdaq closed at record highs on Friday, capping an extraordinary 80-day rebound that saw markets recover nearly $10 trillion in lost value. The S&P 500 finished at 6,173.07, up 0.5%, while the Nasdaq also gained 0.5% to reach its first all-time high since December.

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Markets briefly dipped in late trading after President Trump announced plans to impose tariffs on Canada in response to its new digital services tax. But stocks rebounded into the close, with all major indices posting their strongest weekly gains in over a month.

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The recovery marks a turning point from early April, when the S&P 500 flirted with bear market territory amid concerns over Trump’s sweeping trade tariffs and their inflationary impact. Since then, partial trade deals with the UK and China, a pause on reciprocal tariffs, and a tentative reopening of rare earth exports by China have helped restore investor confidence.

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Technology stocks have led the charge, fuelled by an AI boom and strong chip sales from firms like Nvidia. The Nasdaq 100 hit a record earlier in the week. Investors are also betting on a potential rate cut from the Federal Reserve later this year.

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Treasury Secretary Scott Bessent said he expects the US to wrap up trade negotiations with up to 12 key partners by Labour Day. However, the outlook remains mixed. Risks include a possible reintensification of tariffs after July 9, ongoing debt ceiling negotiations, and broader geopolitical tensions in the Middle East.

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Despite these headwinds, the S&P 500’s valuation has surged. Its price-to-earnings ratio is now above 23, raising questions about whether current prices are sustainable.

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Markets are celebrating for now. But whether this rally holds will depend on Washington’s next moves—and the staying power of corporate earnings in a high-expectation environment.

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