The US stock market is soaring—key indices, such as the S&P 500 and tech-heavy Nasdaq, are at record highs, largely due to strong gains in mega-cap tech stocks. Over the last six months, the Nasdaq Composite has surged 47 per cent, while the S&P 500 has jumped 33 per cent. Year-to-date, the Nasdaq Composite has gained 19 per cent and the S&P 500 has risen 15 per cent.
Why is the US stock market rising?
The US stock market is trading at record-high levels despite concerns that the government shutdown will extend into another week, tariff-related uncertainties, and stretched valuations.
Subho Moulik, the founder and CEO of Appreciate, noted that stable consumer spending and improving corporate profits, despite rate cuts, have helped investors overlook potential tariff impacts for now.
“A rate cut or a falling interest rate scenario typically goes well with equity markets. And, when a rate cut occurs amidst high valuations, investor sentiment tends to remain bullish,” said Moulik.
“Since the 1980s, whenever the Fed has cut rates with markets near all-time highs, US markets have moved higher in the following 12 months every single time, with an average of approximately 14 per cent gain. There’s no reason to believe this cycle will be different,” said Moulik.
Some experts underscore that earnings are doing the heavy lifting.
According to Arindam Mandal, the head of global equities at Marcellus Investment Managers, forward EPS continues to rise, and surprises have exceeded the 10-year average through Q2–Q3.
Valuation is rich, with the S&P 500 at about 22–23 times forward earnings, but the multiple has been supported by rising profit estimates, said Mandal.
Mandal highlighted that productivity has improved, which helps margins absorb wage and cost pressure. There is also a real capital expenditure cycle associated with AI.
“Street work now pegs AI infrastructure spend approaching trillions this decade, with power and grid upgrades pulling in utilities and industrials. Independent reporting shows data-centre demand already pushing up power needs in key nodes,” said Mandal.
Is it the right time to enter the US stock market?
The US stock market is near record highs, with mixed economic signals, including strong corporate earnings, the likely impact of higher tariffs on the economy, and a cooling labour market.
Experts believe the ongoing volatility could impact performance in the medium term; hence, market participants suggest a cautious approach for short-term investors.
“Investors with a long-term horizon, having patience and the ability to withstand short-term volatility, may find it attractive to invest in equities, especially given market resilience in earlier periods,” said Raj Vyas, VP, Fundamental Research, Teji Mandi.
Viram Shah, co-founder and CEO of Vested Finance, believes that, given the current state of valuations and flows, one should ladder their exposure over weeks or months.
“If markets pull back 5–10 per cent, that’s where selective buying becomes compelling,” said Shah.
Mandal says investors should be selective and stagger their investments.
He pointed out that the US market is much more than the “Magnificent 7” or the top ten names. Breadth has been narrow, which is why equal-weight and smaller stocks have lagged the headlines.
“Only about a quarter per cent of S&P 500 names beat the index in 2023 and 2024, one of the lowest readings in over four decades. The broader market has barely moved in four years, and that is where the opportunity sits,” said Mandal.
“We cannot know the future, and this time may be different, but many sectors have been left for dead and could re-rate with patience and valuation discipline. A balanced mix of what is in favour and high-quality companies that are out of favour for cyclical, not structural, reasons can be a good idea,” Mandal said.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.