The Vanguard S&P 500 ETF (VOO) is moving higher today as investors return to equities after a period marked by geopolitical tension and macro uncertainty. As concerns about a broader escalation begin to ease, large-cap stocks are regaining some ground. Because VOO tracks the S&P 500, that improvement is reflected directly in the ETF’s performance.
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Trade SPY with leverageThat shift picked up after comments from Donald Trump helped calm nerves around the Iran situation. Trump indicated the U.S. would avoid further escalation for now and pointed to ongoing discussions aimed at easing tensions, which improved the backdrop for risk assets. As the likelihood of a prolonged conflict diminished, oil prices moved lower, easing pressure on inflation and corporate costs. That change encouraged investors who had stepped back to re-enter the market, pushing equities higher and lifting VOO along with them.
That said, not everyone on Wall Street is convinced the path forward will be smooth. J.P. Morgan strategist Fabio Bassi is urging a more measured approach, arguing that while the business cycle remains resilient for now, the near-term outlook is becoming more complicated. He explains that supply shocks and geopolitical pressures could still weigh on growth and inflation trends, creating a less supportive backdrop for equities.
“We maintain the view of a resilient business cycle into year end; however, we are turning more cautious short term given the supply shock and the potential transmission into the growth outlook and earnings,” Bassi said, pointing to the risk that higher energy prices could drag on both inflation and economic expansion.
Bassi also highlights that the market’s recent weakness has been relatively contained, with modest year-to-date declines and earnings estimates still holding up for now. Still, the strategist warns that the pressure could build if crude prices continue to climb, noting that “consensus EPS” could face further downside under that scenario. The concern is not about an immediate collapse, but rather a gradual erosion in earnings expectations that could cap upside in equities.
More broadly, Bassi believes the current environment is defined less by panic and more by a steady compression in valuation multiples. Investors, in his view, are reassessing growth and liquidity assumptions, which limit how much stocks can expand even when earnings remain intact.
Reflecting that more cautious stance, Bassi has lowered his year-end S&P 500 price target to 7,200 from 7,500.
Disclaimer: The opinions expressed in this article are solely those of the featured strategist. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.