Stocks have roared back to near all-time highs, shrugging off concerns about President Donald Trump’s tariffs and what appears to be a rapidly weakening labor market. The Dow Jones Industrial Average is up more than 1% so far this week through midday Friday, while the S&P 500 and Nasdaq Composite have gained 2.3% and 3.8%, respectively.
Sure, there are reasons for the rally. Corporate earnings continue to impress, with stocks like Shopify and Arista Networks soaring on big beats. Investors are also hoping that bad news on the job front is good news for the market because it should prompt the Federal Reserve to cut interest rates next month. Traders are now pricing in a nearly 90% probability of a quarter-point ease at the Sept. 17 meeting.
But is Wall Street too sanguine about the near-term outlook? The CBOE Volatility Index, or VIX, was on track to end the week trading around 16, a level that indicates the absence of fear in the stock market, after closing the previous week above 20. It’s a no-worries market, but that might be the right vibe. Frank McKiernan, Managing Partner and Co-founder of Third View Private Wealth, thinks the S&P 500 can hit 6900 by year’s end, 8% higher than current levels.
His argument? The combination of expected rate cuts from the Fed as well as lower taxes and deregulation from the Trump administration and Congress should boost profits next year. If the companies in the S&P 500 earn $300 a share in 2026, a 23 multiple would put the index at 6900. “It’s rare to see multiple compression with earnings this strong,” McKiernan says. “The American exceptionalism trade is not over.”
Solid results from Microsoft and Meta Platforms, and Apple’s recent plans to step up its investments in the U.S., have reignited the Magnificent Seven trade. The resurgence of the initial-public-offering market, with strong debuts for Firefly Aerospace, Figma, and Circle Internet Group this summer, is another sign of a renewed appetite for risk.
Yes, August and September tend to be stormier months for the market. But as long as U.S. corporations maintain a relatively upbeat outlook, investors should just hold on tight and wait for those late summer stock squalls to pass.
Call it complacency, if you want, but also call it the right thing to do.
By Paul R. La Monica