The S&P 500 continued to extend its rally at the start of the week, driven by investor optimism amid ongoing trade negotiations between the United States and China taking place in London.
The index’s approach to its historical highs reflects market confidence in the improving macroeconomic outlook and sustained capital flows into risk assets.
At the center of attention is the current round of U.S.–China trade talks, as the world’s two largest economies enter their second day of discussions, marked by a cooperative and constructive tone.
This round of negotiations focuses on resolving barriers related to high-tech exports and strategic minerals.
Although no official statement has been released, mutual agreement on maintaining global supply chain stability has helped ease concerns over geopolitical tensions — a factor that has previously triggered significant volatility in global financial markets.
The future of U.S.–China trade relations will play a crucial role in shaping the trajectory of the S&P 500.
If the two sides reach a concrete agreement on tariffs and technological cooperation, capital flows could further accelerate into key sectors such as industrials, technology, and consumer discretionary — the three pillars of the index. Conversely, should negotiations stall, markets may react negatively in the short term, especially with the S&P 500 approaching a key resistance zone.
Beyond trade, investors are also closely monitoring macroeconomic data and inflation figures, which form the foundation for shaping expectations regarding the Federal Reserve’s monetary policy path. The U.S. economy continues to grow at a steady and positive pace, although signs of divergence are gradually emerging across sectors. Meanwhile, inflation — particularly in services — remains above the Fed’s 2% target, reinforcing caution over the possibility that interest rates may stay higher for longer than previously anticipated.
As a result, monetary policy going forward will be more data-dependent than ever. This week, the U.S. Consumer Price Index (CPI) report will be especially critical. If the data shows continued disinflation, expectations for rate cuts may strengthen, supporting further gains in equity markets. On the other hand, a CPI reading above expectations could stall the S&P 500’s rally due to renewed concerns that the Fed may maintain its tightening stance for an extended period.
On another front, geopolitical risks remain an unpredictable factor, particularly as the conflict between Russia and Ukraine shows no sign of abating. Sudden escalations in global tensions could increase risk aversion, prompting a temporary pullback in capital from risk assets such as equities.
Overall, the outlook for the S&P 500 remains tilted to the upside, but the current rally will need to be reinforced by clearer signals from economic data and concrete outcomes from the trade negotiations. In the short term, upcoming sessions may see some consolidation as investors await new information to confirm the next directional move for the coming quarter.