6 Powerful Signals Point to a Stronger Rally in U.S. and Global Stocks — Is S&P 500 Headed for 8,250?

# 6 Powerful Signals Point to a Stronger Rally in U.S. and Global Stocks — Is S&P 500 Headed for 8,250?

**Wall Street’s summer slowdown has so far looked more like a pause than a reversal. Despite sharp bouts of volatility, U.S. equities have absorbed selling pressure, market breadth has improved, earnings momentum remains exceptionally strong, and investors have yet to embrace a recession scenario.**

The S&P 500 has largely moved sideways around the **7,500 level since May 14**, as leadership continues to rotate beneath the surface. That internal rotation has been accompanied by improving market breadth, suggesting that the rally is no longer dependent solely on a handful of mega-cap technology stocks.

For now, nothing that has happened over the past month has materially changed the broader bullish thesis that the S&P 500 could reach **8,250 by the end of the year**.

The summer slowdown could continue into early autumn, and investors should expect further episodes of volatility. But beneath the market’s relatively calm headline performance, several indicators continue to point toward a stronger underlying trend.

The most important support comes from what can be described as **exceptionally strong earnings momentum**, or FEMO.

There are, of course, meaningful risks. Uncertainty surrounding the long-term economics of artificial intelligence remains elevated. Geopolitical tensions in the Middle East have not disappeared. Inflation remains sticky, Treasury yields are rising, and investors continue to assess how Federal Reserve Chair **Kevin Warsh** will approach monetary policy.

For now, however, the result has been a market that is volatile—but remarkably resilient.

And that resilience may be more important than the volatility itself.

## Leverage Is Turning Volatility Into a Bigger Risk

Volatility becomes particularly dangerous when it is combined with excessive leverage.

Last week provided a stark example.

Leopold Aschenbrenner’s **$45 billion Situational Awareness hedge fund** reportedly collapsed after losses in AI-related long positions triggered margin calls, forcing the liquidation of its public-equity portfolio to Citadel.

The episode undoubtedly contributed to the market turbulence seen last week, alongside what was widely viewed as Kevin Warsh’s underwhelming first press conference.

Yet despite those pressures, the **S&P 500 still gained 1.0% for the week**.

That is an important signal.

The market absorbed forced selling, political and monetary-policy uncertainty, and weakness in semiconductor stocks without breaking its broader bullish structure.

## Semiconductor Stocks Take a Hit

Semiconductor stocks were among the biggest sources of downward pressure on the S&P 500 during the week, falling approximately **3.4%**.

Earlier, on July 19, the semiconductor sector had already appeared vulnerable to a decline toward its **200-day moving average**.

The latest weakness therefore comes as little surprise.

What matters now is whether the decline remains contained within a normal sector rotation or develops into something broader.

So far, the evidence favors the former.

The market’s underlying breadth remains healthy, smaller companies continue to perform strongly, and earnings expectations are still moving higher.

That brings us to the six indicators that matter most beneath the surface.

# 1. Market Breadth: The Rally Is Becoming Broader

One of the strongest bullish signals is the continued improvement in **market breadth**.

The equal-weighted S&P 500 continues to outperform the traditional market-cap-weighted index.

Since the beginning of the year, the equal-weighted S&P 500 has gained approximately **12.1%**, compared with **9.4%** for the market-cap-weighted benchmark.

That distinction matters.

It means the rally is no longer being driven exclusively by the largest companies in the index. A much broader group of stocks is participating, giving the market a stronger foundation.

The so-called **493 stocks outside the Magnificent-7** have significantly outperformed both the Magnificent-7 and the broader S&P 500 since the beginning of the year.

The Magnificent-7 has narrowed the gap somewhat in recent sessions, helped by strong results from companies such as **Microsoft and Amazon**.

But the broader message remains intact: participation is expanding.

Even more encouraging is the performance of the **Russell 2000**.

The small-cap index is trading near record levels and has gained approximately **18.1% year to date**.

That would be difficult to reconcile with a market positioning aggressively for an imminent recession.

Small-cap stocks are typically among the areas most vulnerable to deteriorating economic expectations.

Their strength therefore provides an important signal that investors continue to see sufficient economic resilience ahead.

# 2. Sentiment: Optimism Is Rising—But Euphoria Has Yet to Take Over

Investor sentiment presents a more mixed picture.

Bull-bear ratios across major sentiment surveys are sending different signals.

The **Investors Intelligence** bull-bear ratio is slightly above its historical average, while the **AAII** ratio remains meaningfully below its long-term average.

Retail investors therefore appear considerably more cautious than institutional investors.

That caution may actually be constructive.

Markets tend to become more vulnerable when optimism reaches extreme levels and investors become excessively positioned for further gains.

The current environment does not appear to fit that description.

At the same time, the **Consumer Confidence Index (CCI)** provides a much more optimistic signal.

In July, **52.4% of respondents** said they expected stock prices to rise over the next 12 months.

That compares with a historical average of approximately **35.6%**.

The difference is significant.

The CCI survey also captures a longer investment horizon than the shorter-term bull-bear ratios.

Taken together, the data suggest that investors are optimistic about stocks over the coming year, but the market has not yet reached a level of universal euphoria.

That combination can be supportive of further gains.

# 3. Valuations: Expensive, But Not 1999 All Over Again

Valuations remain one of the strongest arguments used by the bears.

There is no question that U.S. equities are expensive relative to historical averages.

But comparisons with the technology bubble of 1999 and 2000 are becoming increasingly difficult to justify.

The S&P 500’s forward price-to-earnings multiple remains closely linked to the level of optimism reflected in consumer confidence surveys.

The logic is straightforward: if investors do not expect a recession, they are more willing to pay higher multiples for future earnings.

The aggregate forward P/E ratio for the **Magnificent-7 has fallen to approximately 22.80**.

Part of the improvement reflects mark-to-market gains in the reported earnings of companies such as Alphabet and Amazon.

Those gains have also contributed to bringing the S&P 500’s forward P/E down to approximately **19.40**.

Importantly, the same accounting distortions do not apply to the **S&P 400 and S&P 600**, whose valuations remain relatively attractive.

The comparison with the technology bubble is even more revealing.

The forward P/E ratio for the S&P 500 information-technology sector is approximately **20.00**, only **0.60 points above** the S&P 500’s 19.40 multiple.

At the peak of the 2000 technology bubble, the gap was approximately **30 points**.

That does not mean stocks are cheap.

It does mean, however, that today’s valuation structure is fundamentally different from the speculative excess that characterized the dot-com bubble.

# 4. Earnings: The Most Important Bullish Catalyst

If there is one factor that deserves the closest attention, it is earnings.

Corporate earnings continue to deliver impressive results.

Second-quarter S&P 500 earnings growth reached approximately **37.0% year over year**.

While mark-to-market gains contributed to that number, the forward outlook remains strong even after accounting for those distortions.

Current expectations point to earnings growth of approximately **22.1% in the third quarter** and **26.8% in the fourth quarter**.

That means the bullish case is not simply based on earnings that have already been reported.

It is increasingly being supported by expectations for continued earnings growth.

The 2027 earnings outlook is particularly important.

Analysts’ consensus estimate for S&P 500 operating earnings continues to reach new highs, hitting approximately **$407.72 last week**.

Unlike some current-year figures, this estimate is not distorted by the same mark-to-market gains.

That makes it a cleaner measure of underlying earnings momentum.

And the strength is not confined to large-cap stocks.

Forward operating earnings for **S&P 400 mid-cap and S&P 600 small-cap companies** are also rising alongside the earnings outlook for large-cap stocks.

That broad-based improvement strengthens the argument that earnings momentum is becoming a market-wide phenomenon rather than a story confined to a handful of mega-cap technology companies.

# 5. Bonds: Rising Yields Have Not Broken the Stock Market

Bond yields represent one of the most important threats to the current equity rally.

The 10-year U.S. Treasury yield has climbed to its highest level since **January 2025**, approaching the upper end of what can be described as the "old normal" range of approximately **4.00% to 5.00%**.

Inflation-adjusted **TIPS yields** have also moved higher.

Normally, rising Treasury yields would be expected to put pressure on equity valuations.

So far, however, stocks have absorbed the increase surprisingly well.

That resilience matters.

It suggests that investors may be interpreting higher yields as a reflection of stronger economic growth rather than a renewed inflation shock.

As long as inflation expectations remain contained and earnings continue to rise, equities may be capable of tolerating relatively high Treasury yields.

The risk would increase substantially if yields moved sharply higher because of a renewed inflation shock.

For now, that has not happened.

# 6. Commodities: Copper Signals Growth While Gold Tests $4,000

Commodity markets are also sending important signals about the global economy.

Oil prices remain volatile, but the equity market has largely ignored those fluctuations.

Brent crude is currently trading around the middle of the broad and volatile range established since the outbreak of the war.

That suggests investors are not currently treating oil-price volatility as an immediate threat to the broader economic outlook.

Copper provides a more constructive signal.

The metal continues to suggest that the global economy remains in a growth phase, while demand for copper linked to artificial-intelligence infrastructure remains strong.

Copper is currently pressing against the upper boundary of a multiyear rising channel.

That is significant because copper is often viewed as a barometer of global industrial activity.

### Gold Holds Above $4,000

Gold, meanwhile, has broken below its recent price channel but continues to consolidate above the psychologically important **$4,000-per-ounce level**.

That level is now the key support zone.

If gold remains above $4,000, the bullish case remains intact, with **$5,000** still potentially achievable by year-end.

A decisive break below $4,000, however, would change the technical picture and expose the next major support around **$3,500**.

Elsewhere in the metals complex, rare-earth prices have fallen sharply without an obvious news catalyst explaining the move.

They have declined faster than precious metals, while base metals continue to maintain their broader upward trajectory.

# The Summer Slowdown Has Not Broken the Bull Market

The market is far from risk-free.

Questions surrounding the economics of artificial intelligence remain unresolved. Geopolitical tensions in the Middle East could return to the forefront at any time. Inflation remains sticky, Treasury yields are elevated, and the Federal Reserve’s future policy path remains uncertain.

Leverage is another potential source of instability.

Sharp volatility can become significantly more dangerous when leveraged investors are forced to liquidate positions.

The events surrounding Situational Awareness demonstrated how quickly that dynamic can spread through AI-related trades and high-growth equities.

Yet the broader market response has been remarkably resilient.

Despite these pressures, the S&P 500 continues to hold near record territory.

More importantly, the market’s internal structure remains constructive.

# The Bottom Line: Six Signals Still Support the Bulls

At first glance, the market appears increasingly difficult to reconcile with a bullish outlook.

Stocks are near record highs. Valuations are elevated. Treasury yields are rising. Geopolitical risks remain. And investors are increasingly focused on whether AI spending can ultimately generate the earnings required to justify massive capital expenditure.

But beneath the surface, the evidence remains considerably more constructive.

**Market breadth is improving. Small caps are outperforming. Earnings are accelerating. Forward earnings estimates continue to rise. Investor sentiment has not reached extreme levels of euphoria. And stocks have so far absorbed higher bond yields without breaking their bullish structure.**

Those six factors provide a powerful foundation for the continuation of the U.S. and global equity rally.

That does not mean the road ahead will be smooth.

The summer consolidation could continue into early autumn, and further bouts of volatility or profit-taking would be entirely normal after such a strong advance.

But the distinction between a correction and a trend reversal is critical.

**So far, the evidence points to a market experiencing a period of rotation and consolidation—not one preparing for a major collapse.**

If earnings continue to outperform expectations, the global economy avoids recession, inflation remains contained and Treasury yields do not surge into destabilizing territory, the path toward **8,250 on the S&P 500 by year-end remains firmly within the realm of possibility.**

The real question is no longer whether stocks can move higher.

**It is whether these six underlying engines remain powerful enough to carry Wall Street into its next major leg higher.**