By Al Root

President Donald Trump is imposing tariffs, attacking Federal Reserve Chair Jerome Powell, and making life uncomfortable for business generally. So, why is the stock market at all-time highs? Because it's not all about Trump.

The S&P 500 index rose 1.5%, to 6389, this past week, an all-time high, while the Nasdaq Composite gained 1%, to 21,108, also a record. The Dow Jones Industrial Average, the laggard of the trio, finished up 1.3% at 44,902, 113 points away from an all-time high.

Despite the strong performance, six of 10 investors recently polled by Gallup are concerned about the stock market, with 58% believing the worst of the recent market volatility has yet to come. The reason for the fear is mainly down to Trump. His push to deglobalize and turn inward could upend generational engines of economic growth, and risk stagflation. That's the bear case, anyway. Democrats, in particular, appear to believe it -- almost nine out of 10 polled see the worst ahead.

Things just aren't that bad, though. While many investors are worried about the economy, the job market remains strong enough, a fact that should be confirmed when July's payrolls report is released this coming Friday. And workers that do have jobs are making more than before -- median average hourly earnings, tracked by the Bureau of Labor Statistics, have grown nearly two percentage points faster than inflation for the past two years after trailing inflation by one point during the two years before that. "Wage growth has really kicked up," says Jeff Chang, president of Vest Financial, a firm that offers downside protection for stocks in some of its exchange-traded funds.

Artificial intelligence should continue to provide a big boost. Spending by the Big Tech firms continues apace, with Google parent Alphabet having invested almost $40 billion during the first half of 2025, up from $25 billion over the same period in 2024. And that's benefiting companies like TE Connectivity, which makes things that connect Nvidia chips in a data center. The company is expected to generate about $800 million from its data center business in fiscal year 2025, up from about $300 million in 2024.

The fact that Alphabet finished higher the day following its earnings release shows that investors aren't too worried about AI spending, good news for Microsoft, Amazon.com, and Meta Platforms, which report earnings this coming week.

Yes, there are risks. The market is superconcentrated, and Nvidia is critical to the entire market edifice. Any wobbles at the top would be problematic for the S&P 500 as a whole. The top 10 stocks now account for almost 40% of the S&P 500's market capitalization; that figure was closer to 20% near the peak of the dot-com boom at the end of 1999. The market, however, isn't as expensive as it might appear -- the 10 most valuable stocks in the S&P 500 traded for about 27 times 12-month forward earnings, cheaper than 44 times at the start of 2000.

If investors can simply look beyond Trump, they might like what they see.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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July 25, 2025 18:01 ET (22:01 GMT)

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