Stocks have continued to rebound from April lows with the S&P 500 (SPX) up nearly 29% in three months to all-time highs. This remarkable recovery, following a near-bear market plunge, has been driven by a combination of easing trade tensions, resilient economic fundamentals, robust corporate earnings, and renewed investor optimism.

The stock market’s April swoon was largely triggered by President Donald Trump’s announcement of sweeping tariffs on April 2, dubbed “Liberation Day.” These tariffs, targeting nearly all U.S. trading partners with rates as high as 145% on some Chinese goods, sparked fears of a global trade war, inflation spikes, and a potential recession. The S&P 500 shed $9.8 trillion in market value from its February 19 peak to its April 8 low, flirting with bear market territory.

The technology sector, particularly the “Magnificent 7” (Nvidia (NVDA), Microsoft (MSFT), Meta Platforms (META), and others), has been a driving force behind the rebound. Tech stocks, which were battered in April due to tariff-related supply chain concerns, have roared back, with the Nasdaq-100 (NDX) outperforming other indices. Nvidia, for instance, reclaimed its position as the world’s most valuable company, closing at a record high.

The rally has also shown signs of broadening beyond tech. Financials, industrials, and cyclical sectors have contributed to gains. The S&P 500 Equal Weight Index (SPXEW), which weighs all stocks equally, has shown moderate gains, suggesting that the rally is not solely reliant on mega-cap tech.

Investor sentiment has shifted dramatically since April’s panic. The CBOE Volatility Index (VIX), Wall Street’s “fear gauge,” hit its highest level since March 2020 on April 8 but has since retreated, reflecting reduced market anxiety. The VIX is now down to levels not seen since the last time the S&P 500 was at record highs in February. De-escalation in the Middle East, tariff headlines, and the outlook for the economy have contributed to the bullish momentum.

Despite that bullish momentum, risks remain. The S&P 500’s forward price-to-earnings ratio has climbed near 22, well above its long-term average, raising concerns about valuations. The July 9 deadline for the tariff pause and ongoing trade talks with holdouts could reintroduce volatility. While risks such as high valuations and lingering tariff impacts loom, the market’s ability to climb this “wall of worry” underscores its capacity to adapt and thrive.

Investors will now look to impending tariff deals along with the kick-off to earnings season in mid-July. With lofty valuations and stretched technical indicators, the bar is high for equities in the near-term but the momentum for stocks remains with the Bulls. Protection is cheap in the option market as reflected by the low volatility – but maybe it’s cheap for a reason.

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