S&P 500’s Longest Winning Streak Since 2004: Why Wall Street Still Worries in 2025

Key Takeaways

• The S&P 500 (^GSPC) surged 14% from its April 2025 low, marking its longest winning streak since 2004.
• Despite the rally, strategists warn of unresolved risks: trade tensions, recession fears, and Fed rate uncertainty.
• 72% of S&P 500 companies beat Q1 earnings estimates, but momentum is slowing.
• Markets price just a 28% chance of a June rate cut as Fed holds firm on inflation.

The Rally in Context: What’s Driving the S&P 500?

By the Numbers

• S&P 500: 5,650.38 (-0.64% on May 6)
• YTD Gain: +14% from April 8 low.
• Earnings Growth: Q1 EPS up 12.8% YoY, crushing initial 7.2% estimates.

Catalysts Behind the Surge

1. Trade Deal Optimism: Hopes for U.S.-China tariff reductions.
2. Strong Earnings: Tech and consumer discretionary sectors led beats.
3. Labor Market Resilience: April jobs report showed 3.8% unemployment.

4 Unresolved Risks Haunting Wall Street

1. Trade Tariffs: The Sword of Damocles

• $370B in Chinese goods still under Trump-era tariffs.
• No concrete deals announced despite negotiations.
• Morgan Stanley’s Mike Wilson: “A trade deal with China is critical to sustain the rally.”

2. Recession Risks Loom

• Q2 GDP Growth: Projected at 1.2%, down from 2.4% in Q1.
• Inverted Yield Curve: 2/10 Treasury spread negative for 10 months.
• JPMorgan’s David Kelly: “The economy is losing momentum… recession risks rise without fiscal stimulus.”

3. Earnings Momentum Fades

• RBC’s Lori Calvasina: Stocks beating EPS saw 5.2% post-earnings pops (vs. 3.1% avg).
• EPS Growth Forecast: Q2 2025 estimates revised to 6.3% from 9.1%.

4. Fed Rate Cut Uncertainty

• May 7 Fed Meeting: Rates held at 5.25%-5.50%.
• June Cut Odds: 28% (CME FedWatch).
• Mike Wilson: “Monetary policy is a key variable—markets need dovish signals.”

What History Says About Post-Streak Markets

• 2004 Comparison: After a 14-week rally, S&P 500 dipped 8% over the next 6 months.
• 2020 Parallel: Post-pandemic rally saw 11% correction within 3 months.

Strategist Outlooks: Bull vs. Bear

Firm    2025 S&P 500 Target    Key Call
Citi    5,800    “Trade progress needed for upside.”
Morgan Stanley    5,400    “Recession risks justify caution.”
RBC Capital Markets    5,700    “Earnings slowdown demands selectivity.”

FAQ: Investor Concerns Simplified

Q: Is the S&P 500 overvalued after this rally?
A: Forward P/E of 19.8x vs. 10-year avg of 17.2x suggests stretched valuations.

Q: Should I sell stocks now?
A: Dollar-cost averaging and sector rotation (into utilities, healthcare) advised.

Q: What sectors are safest amid uncertainty?
A: Consumer staples (-2% YTD) and utilities (+5%) show defensive strength.

 

HAPPY TRADING