How Wall Street powered to a record high and what comes next

A trade war. A real war with bombs dropped in the Middle East. A barrage of insults hurled by the president of the United States at the head of the Federal Reserve.

The stock market has powered through all of that in the past few months to set a new record Friday and reward investors who stayed their ground through a volatile stretch. The S&P 500 closed at an all-time high of 6,173.

While Wall Street can take a bow – and breath a sigh of relief – there’s no let-up ahead. The pause President Donald Trump put in effect for many tariffs expires in early July. Second-quarter profit reports and upcoming economic indicators could reveal more about the impact of the tariffs that did go into effect. The Fed could face a tricky decision on interest rates.

Here’s a look at what’s happened in markets and what could lie ahead.

Trump appeared in the Rose Garden on April 2 and announced steeper-than-expected tariffs on almost all U.S. trade partners. He especially targeted China, eventually raising the duties on imports from China to 145%. Beijing retaliated by raising tariffs on U.S. goods to 125%.

Within just four days, the S&P 500 fell about 12%, and the Dow Jones Industrial Average lost nearly 4,600 points, or about 11%.

Trump shrugged off the stock market drop but he couldn’t ignore the signs of trouble in the bond and foreign exchange markets. Tumbling prices for U.S. government bonds raised worries that the U.S. Treasury market was losing its status as the world’s safest place to keep cash. The value of the U.S. dollar also sank in another signal of diminishing faith in the United States as a safe haven for investors.

On April 9, Trump announced on social media a “90-day PAUSE” for most of the tariffs he’d announced, except those against China. The S&P 500 soared 9.5% for one of its best days ever.

In May, the administration struck a trade deal with the United Kingdom. Then came the biggest news: The U.S. and China said that they were temporarily rolling back most of the tariffs they’d imposed on one another. The countries have indicated they’ve reached a deal, but details are scarce.

Markets briefly got spooked when Trump threatened tariffs against the European Union, but he decided to hold off – until July 9 – as the countries negotiate.

The trade war was pushed out of the headline by a real war this month as Israel and Iran attacked each other. The price of oil spiked, threatening to boost inflation and slow the global economy. A U.S. strike on Iranian nuclear facilities was followed by a cease-fire and oil prices dropped sharply. Relieved, Wall Street resumed its climb toward a new record.

Trump wants the Fed to lower interest rates. The Fed says it needs to see the impact of Trump’s tariffs before it can act. The president has taken to regularly bashing Jerome Powell, whose term as Fed chair expires next year. According to the Wall Street Journal, Trump could name his nominee to replace Powell unusually early, in an attempt to undermine him. The drama could influence trading in the bond and foreign exchange markets, and by extension on Wall Street.

Strong profit reports for the first quarter helped offset the pressure from tariffs. Soon, companies will report results for the quarter ending June 30. While Wall Street analysts have lowered their expectations for earnings growth for the companies in the S&P 500, they still forecast solid growth of 5%, according to FactSet. The average quarterly profit growth over the past five years is 12.7%. Some companies withdrew profit forecasts amid the uncertainty created by tariffs, making forecasting even trickier.

In a sign that stocks are still sensitive to trade developments, the S&P 500 fell briefly Friday afternoon after Trump said he was halting trade negotiations with Canada over its plans to continue with its tax on technology firms.

The “90 day PAUSE” with most countries ends July 8. There’s considerable uncertainty about what’s going to happen after that. Trump’s so-called reciprocal tariffs — aimed at countries with which the United States runs trade deficits and ranging from 11% to 50% — could snap back into place, something that risks spooking the markets.

The president could also say that his negotiators are making progress with some or all of the targeted countries and give them another reprieve. Members of his administration seemed to indicate this week that there is some flexibility in the deadline.