Stocks Are Booming. Investors Are Bullish. Next Week Will Test Both.

Traders working at the New York Stock Exchange (NYSE), today, Friday, June 27, 2025.

U.S. stocks are back to their record setting ways again Friday, with the S&P 500 now pegged about 9% higher for the year, thanks in part to a flurry of trade deals, solid corporate earnings and a resilient domestic economy.

The pace of gains driving stocks higher, however, is starting to slow, and investor reaction to this week’s wave of corporate earnings updates has been muted, even amid a run of better-than-expected results.

LSEG data suggests collective second-quarter profits for the S&P 500 are forecast to rise 7.7% from the same period last year to around $538 billion. That’s better than the 5.7% pace forecast at the start of the reporting period, but still a sharp decline from the 13.7% growth rate posted over the first three months of the year.

Still, around 80% of reporting companies have topped Wall Street’s forecasts, well ahead of the four-quarter average of around 76% and the historical pace of around 67%.

Thomas Shipp, head of equity research at LPL Financial, describes the early over results as “in-line to slightly better than recent history,” with investors likely tracking how company bosses see the developing economic terrain.

“An earnings surprise on the quarter will only go so far if forward guidance underwhelms,” he said. “Investors are primarily focused on forward-looking commentary.”

Ron Temple, chief market strategist at Lazard, is also looking ahead.

“This earnings season is unlikely to deliver any revelations, as companies are going to strive to avoid talking about how tariffs affect prices and margins,” he said. “My expectation is that the earnings season in October is going to be the moment of truth.”

That could explain why the pace of broader market gains is slowing into the close of the month, even as stocks continue to print record highs.

The average daily advance for the S&P 500 has been around 0.15% so far this month, compared with daily advances of 0.24% in June, and 0.29% in May. July’s month-to-date advance of around 2.6% is also around half the pace of gains booked in May and June.

The market’s slowdown doesn’t seem to be spooking investors. The benchmark gauge for stock market volatility is trending near the lowest levels of the year.

The Cboe Group’s VIX was last pegged at 15.01, suggesting options traders expect daily swings of around 60 points for the S&P 500 over the next month. That compares to the early April peak of around 165 points.

On the flip side, Goldman Sachs noted late Thursday that its Speculative Trading Indicator, which tracks stock market risk-taking, is hovering near the highest levels since the dot-com and pandemic-era bubbles.

Citing the renewed meme stock frenzy, outperforming IPOs, and continued bets on the so-called Magnificent Seven tech giants, Goldman analyst Ben Snider and his team suggest the reading “signals near-term upside risk for the broad equity market.”

But they also caution it “increases the risk of an eventual downturn.”

Barclays’ analysts also notes that retail investors are “the primary driver of recent upside,” with more than $50 billion in global equities added to smaller investor portfolios over the past month.

“Re-risking seems to be the priority for small investors as improved sentiment into earnings, resilient macro data and Fed cut speculation combine to outweigh still-lingering tariff threats and deficit concerns,” the bank said in a note published Friday.

That comparative tension of low volatility and extended retail risk-taking, puts next week’s packed market calendar in stark focus.

Investors will navigate 162 June quarter earnings from S&P 500 companies, including four of the Magnificent Seven tech giants: Apple, Amazon, Meta Platforms and Microsoft. A Federal Reserve rate decision, updated inflation data and a crucial July jobs report are also on the slate.

President Donald Trump’ Aug. 1 deadline to renew reciprocal tariffs also looms, as does an interest rate decision from the Bank of Japan that could have implications for U.S. bond markets.

“Next week presents a huge menu of event risks,” said John Hardy, global head of macro strategy at Saxo Bank. “These could surprise in either direction, but my overall sense of the week ahead is that broad risk sentiment is extremely complacent.”

Write to Martin Baccardax at martin.baccardax@barrons.com