The Overall Trend and Core Contradictions of the US Stock Market The "Tug of War" Between Earnings and Valuations

The S&P 500's forward price-to-earnings ratio has reached 22.2x, significantly higher than the long-term average of 15.8x, and valuation expansion is nearing its current limit. Whether the upward trend can continue in the second half of the year will depend heavily on companies' ability to deliver earnings. Analysts currently expect 5.9% year-on-year earnings growth in Q2 and 8.5% for the full year, with growth expected to jump to 14% in 2026. If earnings season (July-August) reveals that tariff costs erode profit margins or demand weakens, high valuations may be difficult to maintain.
Liquidity Expectations and Policy Gameplay
Although the Federal Reserve has delayed rate cuts due to tariff-driven inflation, interest rate futures are still betting on three rate cuts before the end of the year, with the first likely in September. This expectation provides key support for the stock market. However, caution is advised: if employment data exceeds expectations (such as the upcoming June non-farm payroll report) or inflation becomes more viscous than expected, the dovish shift could be unsuccessful, triggering market volatility. Concerns about Market Breadth
Tech stocks (+15.4%) and industrial stocks (+15.4%) led gains in the first half of the year, but consumer discretionary stocks (-2.3%) and energy (-0.2%) dragged down the index. The "Big Seven" contributed nearly 40% of the S&P's gains, while the equal-weighted index rose only 4%, reflecting that most individual stocks failed to outperform the leading stocks. A healthy rally requires participation from more sectors, otherwise the risk of a correction will increase.

⚙️ 2. Divergence among Tech Giants and the Evolution of the AI Industry Chain
Semiconductor and Computing Infrastructure: Nvidia's Blackwell-architecture GPU (B100) continues to outstrip demand, while AMD's MI350X is catching up. TSMC's 2nm process technology, which will enter mass production in the second half of the year, will drive a leap in AI chip performance. Liquid-cooled servers and nuclear power supply (small modular stack technology) have become new focus areas for addressing computing power consumption.
Software and Ecosystem Integration: Microsoft Copilot is deeply embedded in Office and Azure, driving a surge in demand for enterprise-level AI agents. OpenAI's GPT-5 and Google's Gemini Ultra are driving the adoption of multimodal applications, but some giants (such as Tesla and Netflix) have already experienced a pullback from highs, and insider selling signals warrant attention.

Risk Points: AI trading is overcrowded, with signs of short-term momentum fading. Combined with valuations that overdraft future growth, technical pullback pressure is building.

🚀 III. Investment Opportunities in Emerging Growth Sectors
FinTech
The improved regulatory framework for stablecoins (the GENIUS Act) has driven a 521% surge in the share price of USDC issuer Circle this year, while Coinbase, as a trading platform, has benefited from increased liquidity.

The legalization of real estate crypto-backed loans and the expansion of the real-world asset (RWA) tokenization market are empowering payment and trading platforms like Blockchain and Robinhood.

Quantum Computing and Medical Technology
Quantum hardware vendor D-Wave secured $400 million in funding to advance the commercialization of its annealing system; IonQ is collaborating with pharmaceutical company AstraZeneca to shorten drug development cycles. Gene-editing company CRISPR is accelerating commercialization, Moderna is expanding its mRNA cancer therapy, and brain-computer interface (BCI) company Blackrock Neurotech has received FDA approval.
Space Economy
Given policy support, satellite communications (AST SpaceMobile), lunar development (Intuitive Machines), and commercial space stations (Voyager Technologies) have become new focus areas. SpaceX alternative Rocket Lab saw a 32% year-over-year revenue increase, demonstrating a strong industry outlook.

🛡️ IV. Allocation Strategies for Defensive and Cyclically Sensitive Sectors
Overweight Sectors:
Energy - Geopolitical risks are driving up oil price expectations, and free cash flow margins remain high;
Utilities - Defensive attributes coupled with surging AI power demand are beneficiaries of the nuclear energy transition;
Financials - Regulatory relaxation may accelerate buybacks, and the interest rate cut cycle is positive for credit demand.
Underweight Sectors:
Consumer Goods - Tariffs are leading to soaring costs (potential EBITDA losses of 10%-70%) and weak pricing power.

💡 5. Second Half Investment Strategy: Embrace the Technological Revolution and Balance Risk Exposure
Focus on Earnings Certainty: During Q2 earnings season, screen for companies with strong cost-passthrough capabilities and AI-enabled efficiency gains (such as cloud infrastructure and semiconductor equipment). Biya is a very convenient and user-friendly tool, particularly effective in the US and Hong Kong stock markets. It allows you to access more news, eliminating the need for multiple platforms. It's very convenient and practical.
Positioning to benefit from interest rate cuts: If the September rate cut signal is clear, increase holdings in interest-sensitive sectors (financials, real estate) and high-growth technology stocks. Biya is still very useful.
Diversify industry risk: Avoid excessive concentration in the "Big Seven" and focus on sectors with potential for catch-up gains, such as industrials and medical technology.
Leverage derivatives for hedging: Micro E-mini futures contracts (such as CME's MNQ) provide a liquidity risk management tool, with year-to-date trading volume surging 35%.
The journey to new highs for the US stock market is by no means smooth, but the underlying drivers of technological revolution and corporate earnings continue to support the market. Investors need to dynamically balance industry trends (AI, quantum, space), policy turning points (interest rate shifts), and risk buffers (valuations, geopolitical fluctuations) to capture excess returns in a complex market.