S&P 500 Could Extend Gains if Macro Risks Ease in Second Half of 2025

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S&P 500 Could Extend Gains if Macro Risks Ease in Second Half of 2025

• S&P 500 saw its six-day winning streak end amidst rising US yields and concerns over Trump’s tax cut proposals and US debt.
• The “Magnificent 7” stocks are currently underperforming but could potentially drive a larger S&P 500 recovery in the second half of 2025.
• Technical analysis indicates bullish momentum for the S&P 500, although a recent pullback suggests potential for a bearish correction.

The struggled today as US yields rose and markets await a crucial vote in Washington, DC, over US President Trump’s tax cut proposals.

Trump visited Capitol Hill on Tuesday to urge Republican lawmakers to agree on a bill that would extend the 2017 tax cuts from his first term, among other measures.

Investors are concerned that this bill could increase the U.S. budget deficit faster than expected.

On Friday, Moody’s Investors Service downgraded the U.S. credit rating, adding to worries about the country’s growing debt.

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Source: LSEG

Markets do appear to have shrugged off the Moody’s downgrade, with yesterday’s rally hinting at such.

Markets are also waiting on comments from Federal Reserve officials scheduled for later today as uncertainty around US monetary policy decisions continues to linger.

The S&P 500 is on a six-day winning streak, but for the year thus far, the magnificent seven stocks have underperformed. As markets eye a ******* recovery, will the ‘mag 7’ stocks be the catalyst?

Magnificent 7 2025 Performance YTD

The magnificent 7 stocks still have some catching up to do in comparison to the rest of the index. This is actually a welcome change given last year’s concern that the Mag 7 had been the driving force of the rally over the last 24 months or so.

The change in market dynamics has seen market participants spread their exposure around this year and pivot to other sectors.

The interesting question, though, is if the Mag 7 stocks post a good recovery in the second half of 2025, will this drag the S&P to fresh all-time highs? Now obviously, this would depend on a lot of variables but it does require a closer look.

A recent Bloomberg survey revealed Wall Street strategists have mixed views regarding the end of year target for the S&P 500. According to the survey, the median S&P 500 year-end target is 5,900 for 2025, but the forecasts range widely from 5,200 to 7,007, reflecting significant divergent market views.

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This is a definite possibility but there are a host of variables that are in play. These estimates could change pretty drastically as the year progresses, we have already seen some drastic changes to global forecasts on a host of asset classes in 2025. This rollercoaster is one I expect may continue.

Technical Analysis – S&P 500

From a technical standpoint, the S&P 500 on the weekly timeframe enjoyed a bullish week last week.

The new week has started somewhat more cautiously but bulls still appear to be holding the upper hand.

The *******-14 RSI reinforces this as it remains above the neutral 50 handle which suggests bullish momentum remains intact.

Tuesday daily candle close did however, snap a six-day winning streak with the S&P closing as an imperfect hanging man candlestick. This is usually a sign of a bearish correction which may concern bulls looking at intraday moves.

S&P 500 Weekly Chart, May 20, 2025

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Source: TradingView

Dropping down to a four-hour chart (H4), the S&P 500 index has been staircasing its way higher since bottoming out on April 7, 2025.

More recent price action shows that bulls remain in control following a series of higher highs and higher lows.

However, Tuesday’s session did see a significant pullback toward support at 5910 before bouncing higher once more.

For now, the bullish structure remains intact with a four-hour candle close below the 5883 handle needed to invalidate the bullish momentum.

Until then, the chances of another higher high remain strong, but this will obviously hinge on market sentiment remaining positive.

S&P 500 Four-Hour Chart, May 20, 2025

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Source: TradingView

Support

Resistance

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#Extend #Gains #Macro #Risks #Ease

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