Markets Are Soaring—But Is the Ground Shifting Beneath Them?

We’re halfway through the year, and Wall Street feels like a magician pulling off a flawless illusion. The S&P 500 just hit record highs… despite war, tariffs, rate uncertainty, and AI skepticism. How? Why? And what next?

Yahoo Finance’s latest Chartbook gives us a rare x-ray of the market’s internals—35 charts that track investor sentiment, policy changes, and economic forces reshaping portfolios in real-time. We read it so you don’t have to. Here’s what actually matters.

1. A Rally Without Euphoria

Despite new highs, no one’s really partying. Goldman’s Equity Sentiment Index? Dead neutral. Hedge funds and retail traders aren’t chasing the rally, and that tells us something: this isn’t driven by meme stock mania or FOMO. It’s real fundamentals.

Earnings revisions are flashing bright green, especially in tech. Companies like those tracked in our Magnificent 7 Insider Trading Follower strategy are showing insider conviction, too—which, frankly, is rarer than you’d think in this kind of environment.

Big Tech valuations are elevated, yes, but not irrational. Barclays points out they’re actually cheaper on a forward basis than earlier this year—despite stronger earnings expectations. It’s one of the few parts of the market where price is still (sort of) following performance.

If you’re looking to ride this quietly powerful trend without stock-picking stress, Surmount’s Deep Tech Innovators and Quantum Computing Leaders strategies might be worth a look. They rebalance automatically, keeping you exposed to the long-term AI wave without needing to micromanage positions.

2. Tariffs, Labor Shortages, and the Return of Sticky Inflation

Here’s where the plot thickens.

Tariffs are back—aggressively. Nearly a quarter of the CPI increase in June was tariff-driven. Appliance and toy prices are spiking, and companies are running out of ways to absorb costs without raising prices.

At the same time, immigration restrictions are draining the labor pool. Goldman, Moody’s, and the EY team all agree: labor force growth is slowing, wage pressures are rising, and the ceiling for U.S. economic growth may now be closer to 1% than the 2% we’ve grown used to.

The result? Investors should expect “muggy” inflation and possibly a stagflation-lite environment. Sectors that thrive in inflationary or defensive environments—like energy, infrastructure, and essentials—could outperform.

That’s where Surmount’s Recession Resistant and Climate Adaptation & Resilience strategies come in. Whether you’re allocating to defensive sectors or backing infrastructure projects critical for climate and economic stability, these strategies align with what the macro is telling us.

3. Is Passive Investing Breaking the Market?

A growing number of strategists are sounding the alarm on passive investing. Duke’s Campbell Harvey calls it out directly: by buying stocks based on market cap alone, passive flows distort price discovery, raise correlations, and increase systemic risk. Basically, everyone’s buying the same stuff—until they’re not.

It doesn’t help that the S&P is now more tech-heavy than ever. Nvidia alone is nearly the size of the entire healthcare sector. And while tech’s momentum is real, this kind of concentration leaves portfolios exposed if sentiment turns.

One way around that? Smarter algorithms. Strategies like our GLD-Tech Rotation or Dynamic Ratio Allocator are built specifically to counteract crowding risk—allocating across gold, tech, and broad market indices based on volatility, performance spreads, and historical reversion.

In short: if you’re passively riding this rally, you might be standing on a fault line. Don’t wait for the quake.

4. Global Rotation: A Real Thing This Time?

Here’s something under the radar: international stocks have outperformed the U.S. by over 1,200 basis points this year. And this isn’t just about valuation arbitrage—it’s about earnings power. JPMorgan notes that European and Japanese firms are beating expectations, and emerging markets (especially tech-forward ones) are beginning to shine.

This global momentum is exactly what our Investing in Argentina strategy is built to capture. By equally allocating across a diversified set of Argentinian stocks, it lets investors tap into a high-volatility, high-potential market that’s been overlooked by most global funds. With the right risk profile, it’s one of the most interesting global plays in 2025.

If you’re more conservative but still want global exposure, strategies like Global Real Estate Exposure or Investing in UAE give you regional diversification without the equity rollercoaster.

5. The Fed Steps Back (Markets Step Up?)

Weirdly enough, the Fed isn’t the main character in this cycle. Yes, Powell’s still in the spotlight, especially after Trump’s saber-rattling about firing him—but the real drivers of this mar

ket are corporate earnings, inflation sentiment, and international capital flows.

And here’s the twist: even if the Fed cuts, long-term yields might stay elevated. That’s because foreign investors are beginning to lose trust in U.S. fiscal policy—and that skepticism could translate to higher borrowing costs and dollar volatility.

If your portfolio is still rate-sensitive, you may want to lean into strategies that automatically adjust across market conditions. Surmount’s Rate Adaptive Core or RSI-Weighted ETFs shift allocations based on momentum and macro signals—no need to guess where Powell’s head is at.

Wrapping Up

Midway through 2025, the story isn’t just about new highs—it’s about what’s changing beneath the surface.

• Big Tech isn’t overvalued—it’s leading on fundamentals

• Tariffs and immigration policies are reshaping inflation

• Passive flows are crowding trades and distorting price signals

• The global rotation is gaining real footing

• And the Fed? Not your north star anymore

The landscape is shifting fast. And we’re building tools at Surmount to help you move with it—whether you’re into macro-driven signals, thematic innovations, or sector-specific tilts.

Want to explore strategies that match your market view?