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Bull Market Summer: 6 Reasons Wall Street's Rally Continues

With the first half of the year in the books, bulls have regained control of Wall Street. Below are six reasons that bulls will remain in control into the summer:

Stocks are Entering an Election Cycle Seasonality Sweet Spot

Stock market seasonality is the practical study of how specific times of year often lead to repeatable patterns that traders and investors can use to gain an edge in the stock market. Seasonality was popularized Yale Hirsch, who published groundbreaking research on seasonality and cycles and founded the wildly popular “Stock Trader’s Almanac.”  Hirsch not only examined the calendar; he took his research a step further and illustrated the often-repeated and predictable patterns associated with the four-year presidential cycle.

While seasonality may sound like voodoo to new investors, the results speak for themselves. Over the past few years, election cycle seasonality has been dead on. For instance, election cycle seasonality has warned investors that the first quarter of the presidential cycle (Q1 2025) tends to be weak. Sure enough, the S&P 500 declined by 4.3%, and that’s after rallying off the lows. The good news is that seasonality tends to shift after Q1 as we have witnessed. July, during the first year of the presidential cycle, is the strongest month on average.

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Image Source: Brown Technical Insights, Optuma

Investors Don’t Believe the Market Rally Yet

The Nasdaq 100 Index ETF ((QQQ - Free Report) ) printed fresh all-time highs last week. However, those headlines were not on many investors’ bingo cards during the tariff market mayhem of early 2025. Despite the face-ripping market rally off the lows, investors remain unconvinced that the bull market will continue. The AAII Sentiment Survey gauges the opinions of individual investors on where the market is heading in the next six months. Historically, the average number of bulls outweighs the average number of bears. However, the most recent AAII Sentiment Survey shows that just 35.1% of respondents are bullish while more than 40% are bearish – a bullish sign for contrarian investors.

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Image Source: AAII

The IPO Market is Reborn in 2025

For the past three years, the number of IPOs has been stagnant. Often, new companies have decided to avoid going public due to regulations and the macroeconomic environment, or have waited too long to go public, resulting in lower stock prices. However, in 2025, the IPO market has performed a 180-degree turn, and several companies have had successful debuts, including AI juggernaut CoreWeave ((CRWV - Free Report) ) and stablecoin king Circle Group ((CRCL - Free Report) ).

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Image Source: Zacks Investment Research

The 2025 IPO revival is a good omen for Wall Street, as IPOs are the lifeblood of the market, offering new and innovative growth opportunities for investors and signaling a risk-on appetite on Wall Street.

Interest Rates are on the Horizon

Fed-driven liquidity is one of the most critical catalysts that savvy investors track. A ‘dovish’ Fed (low-interest rate policy) environment can drive stocks higher, while a ‘hawkish’ Fed (high-interest rate policy) can bottle up stocks. Fed Chair Jerome Powell has received considerable criticism from both sides of the political aisle for maintaining interest rates at elevated levels recently. However, Morgan Stanley ((MS - Free Report) ) predicts that this will change soon, forecasting seven rate cuts in 2026.

Geopolitical & Tariff Uncertainty is Removed

Historically, Wall Street hates uncertainty. The two biggest uncertainties currently are geopolitical tensions and the ongoing tariff negotiations. On the geopolitical front, President Trump was able to successfully negotiate a ceasefire between Israel and Iran in the Middle East, lowering the temperature on escalation concerns. Meanwhile, Trump trade advisor Kevin Hassett stated in an interview last weekend that several trade deals are nearly finalized, and there are around 20 that are in the final innings.

Risk-on Assets Underscore Animal Spirits

Another risk-on sign is that momentum stocks, such as SoundHound AI ((SOUN - Free Report) ), BigBear.AI ((BBAI - Free Report) ), and Sofi Technologies ((SOFI - Free Report) ) are attracting investor interest.

Bottom Line

As Wall Street heads into the summer months, six powerful tailwinds line up, suggesting that the bulls are well-positioned to maintain their grip on Wall Street.

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