S&P 500 Overall Market

The S&P 500 and Nasdaq Composite — the tech-heavy index tracking roughly 3,000 U.S. stocks — fell in every session this week, marking a clean sweep of red days that signals more than routine profit-taking (WSJ Markets). The culprit is a familiar cocktail: sticky inflation expectations, renewed tariff anxiety, and a bond market (where rising yields compete with stocks for investor dollars) that refuses to cooperate. What's notable is the timing — the selloff hits just as Q2 earnings season is supposed to provide a narrative boost, meaning macro headwinds are loud enough to drown out company-level good news. For a rally that had recovered sharply from April lows, this week was a pointed reminder that sentiment can reverse fast when the worry list gets long enough.

Wolfe Research is holding its bullish call on U.S. equities for the second half of 2025, pointing to artificial intelligence infrastructure spending and semiconductor demand as the primary engines (Investing.com). Semiconductors — the chips that power everything from data centers to smartphones — have become the market's de facto leading indicator, and Wolfe argues the capex (capital expenditure, or corporate investment spending) cycle driving AI buildout has plenty of runway left. The call is a direct counterweight to this week's broad selloff: if the bulls are right, dips in large-cap tech are buying opportunities rather than trend breaks. The key risk is that 'AI will save us' has become consensus thinking, which historically is exactly when markets find a way to disappoint.

Veteran investor Jeremy Grantham told CNBC that AI-inflated valuations have pushed the U.S. stock market to historically extreme levels, citing the Buffett Indicator — the ratio of total stock market capitalization to GDP — at a staggering 235%, well above the ~200% level Warren Buffett once called 'playing with fire.' For context, the closest historical parallel is the dot-com bubble of 1999-2000, when that ratio briefly touched 200% before a brutal multi-year collapse. Grantham acknowledged the timing of any correction is 'terribly uncertain' — he issued similar warnings in March 2024 and markets kept climbing — but he used SpaceX's roughly $2 trillion debut valuation as a textbook sign of peak-cycle euphoria, comparing its likely trajectory to Amazon's 92% post-bubble crash. The core concern: when market cap is more than twice the size of the underlying economy, the long-run expected returns for broad U.S. equities are, in Grantham's words, 'as poor as almost any other time in history.'