TradingKey - Despite ongoing concerns over tariffs and rising U.S. fiscal deficits, investor optimism in U.S. equities remains strong. The S&P 500 and Nasdaq Composite hit new all-time highs on multiple occasions this week. CNN’s Fear & Greed Index has now entered the “extreme greed” zone, raising concerns among analysts about a potential market pullback.

As of July 3, both the S&P 500 and Nasdaq Composite closed at record highs. Over the past three months, the S&P rose 16.36% and the Nasdaq surged 24.47%, fully recovering from earlier losses in 2025.

SPDR S&P 500 ETF, Source: TradingKey

Bank of America’s Michael Hartnett warned that with the S&P 500 hitting fresh records, it may soon send a sell signal. He advised investors to consider profit-taking once the index reaches 6,300.

Hartnett noted that further gains could lead to an equity bubble, fueled by rising expectations of Fed rate cuts and the passage of Trump’s tax cut and spending bill.

Market Sentiment Hits Extreme Greed

Data shows that the CNN Fear & Greed Index climbed to 77.97 on July 3, surpassing the "extreme greed" threshold of 75 — the highest level since February 2024.

CNN Fear & Greed Index, Source: MacroMicro

However, Hartnett added that overbought markets can stay overbought for longer, as greed is often harder to curb than fear.

Wedbush analyst Dan Ives remains bullish, forecasting that both Microsoft and NVIDIA could see their market caps rise to $4 trillion this summer, from current levels of $3.71 trillion and $3.89 trillion, respectively.

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Ives pointed out that investors may still be underestimating the growth wave driven by $2 trillion in AI investment expected from corporations and governments over the next three years.

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