The US stock market is accelerating its rise - is the bull market returning or just a flash in the pan?

Investors who bravely bottomed out last month are now enjoying the benefits. But, is this strong rebound in the US stock market coming too fast and too fierce? Some Wall Street insiders are starting to worry about the current market sentiment. Michael O'Rourke, Chief Market Strategist at Jones Trading, said in an interview, "I think what we are seeing now is emotion-driven, people are chasing gains, fearing missing out on opportunities." Since hitting a temporary low on April 8th, the S&P 500 index has rebounded by over 17% as of Tuesday's close, which is a very rare surge in the past 75 years. According to data from Birinyi Associates, since 1950, there have been only six instances where short-term returns were equal to the gains over the last six weeks. And after similar rebounds, the returns in the following 12 months have been consistently strong. The most notable example is the recovery of the market after the initial plunge due to the COVID-19 pandemic in early 2020, where the S&P 500 rose by 46% over the following year. However, there is still uncertainty in the market's future. Some investors believe that the stock market may revisit the low point of April. Wall Street legend Paul Tudor Jones has expressed that as the economic impact of Trump's tariff policies gradually becomes apparent, the stock market could return to lower levels within the year. Mark Hackett, Chief Market Strategist at Nationwide, pointed out that the valuations in the US stock market are still high, with the expected P/E ratio of the S&P 500 reaching 21 times. He wrote in an email commentary, "The market has quickly transitioned from oversold to overbought at a record pace." In terms of technical indicators, the Relative Strength Index (RSI) of the S&P 500 surpassed 70 on Wednesday, indicating an overbought condition. On April 4th, before Trump announced the 90-day tariff suspension, the index had fallen below 30. Despite concerns about an overheated market, bullish investors can find reasons to continue buying. Trump has reversed many tariff decisions that could have had a significant impact on the economy, and most expect him not to reintroduce those harsh tariff policies, at least not to the extent announced on April 2. On the other hand, hedge funds and institutional investors who either sold out in April or stayed on the sidelines are now facing pressure to chase gains. Trade negotiations between the US and China, as well as the US and UK, have also released some positive signals. Trump announced a 90-day partial pause on tariffs with China and significantly cooled the trade war. According to data from J.P. Morgan, the current effective average tariff rate in the US has dropped from nearly 24% to 14.4%. While still higher than early 2025 levels, it is significantly lower than the recent peak. Optimism also stems from the fact that most economic data released so far have not shown substantial impacts on employment or consumer spending due to tariffs and policy uncertainties. However, the full data for April has yet to be released, and many economists believe that the negative effects may take longer to fully appear. Melissa Brown, Managing Director of Investment Decision Research at SimCorp, noted, "Small and medium-sized businesses are likely to have already been affected and may not recover in the short term." There are still many mysteries surrounding the future tariff policies of the White House. While there is a widespread speculation about Trump's tendency towards "bearish options," there are still uncertainties about the direction of these policies. Of particular concern are the national security tariffs on semiconductors and pharmaceutical products, which remain a focus for investors. O'Rourke revealed that the US Department of Commerce was instructed to initiate related investigations in early April, and if the government does implement high tariff measures on sensitive industries, it could once again trigger market turmoil. This uncertainty highlights a core risk: a single post from Trump on Truth Social could cause significant market volatility. O'Rourke also stated, "I'm starting to wonder if the President is backing off on the tariff issue because of the market's intense reaction last month." Apart from the stock market, the dynamics in the bond market are also attracting attention. The yield on the 10-year US Treasury bond quietly rose above 4.5% on Wednesday, returning to the levels last month that caused market panic and forced Trump to suspend tariffs. Bond prices and yields are inversely related, so a rise in yields means a drop in bond prices. George Cipolloni, Portfolio Manager at Penn Mutual Asset Management, said, "The rise in long-term yields could be a key factor in our next market battle." As of Wednesday, the overall performance of the US stock market was mixed, with the S&P 500 slightly up, the Nasdaq index showing a larger gain, while the Dow Jones Industrial Average and the small-cap Russell 2000 index were down.