Although US stocks just completed one of the most impressive quarterly sprints in recent years, an increasing number of financial institutions are warning investors that the market trajectory in the second half may not replicate the previous unidirectional rally. After experiencing geopolitical fluctuations in the first quarter and the impact of artificial intelligence on traditional industries, US stocks saw a notable recovery in the second quarter. Data shows that the S&P 500 Index has accumulated considerable gains since early April, marking its best quarterly performance in several years. The Nasdaq Composite Index is also poised to record its largest quarterly gain in years. The semiconductor sector emerged as the biggest winner, with relevant indices surging to historic records. Shares of some Asian chip giants even doubled.

Market consensus holds that continuously improving corporate earnings expectations are the primary driver of this rally. Statistical data indicates that S&P 500 earnings for the second quarter are expected to grow significantly year-over-year. If realized, this will mark the second consecutive quarter of high earnings growth. Notably, unlike previous years when analysts lowered forecasts before earnings season, earnings expectations for the second quarter this year were consistently revised upwards, indicating that the market remains firmly confident in corporate fundamentals. Earnings improvement has provided solid support for valuation expansion, leading most institutions to maintain an optimistic view on US stocks.

However, as the second-quarter earnings season is about to begin, the market will face its first test of the second half. Index gains over the past year mainly stemmed from upward earnings revisions rather than multiple expansion. This means future corporate earnings must continue to exceed market expectations, which are already quite high, for the rally to continue. Investors' focus is also shifting from large AI infrastructure companies to the sustainability of capital expenditure across the entire AI supply chain and their profitability returns. Additionally, fund flows may affect short-term trends. Since stocks significantly outperformed bonds in the past quarter, many large institutions may conduct asset rebalancing at the end of the quarter, selling some stocks and increasing bond holdings. This operation could create pressure on the stock market in the short term.

Uncertainty regarding the Federal Reserve policy outlook remains the biggest variable. After the new Fed Chair presided over the first interest rate meeting, market divergence on the future interest rate path significantly widened. Some institutions believe there will be no further rate hikes this year, while others expect multiple hikes before the end of the year. This policy uncertainty has become one of the main sources of risk in the current market. At the same time, rising market leverage levels have also attracted attention. Since the beginning of this year, the scale of options trading, margin debt, and leveraged ETF assets have all expanded rapidly, especially with large amounts of capital flowing into semiconductor-related products. The high concentration of leveraged funds may exacerbate future market volatility. Once negative news emerges, selling pressure could be rapidly amplified.

Although most institutions believe corporate earnings growth is still sufficient to support the continuation of the bull market, after experiencing the rapid rise in the second quarter, US stocks are likely to enter a phase of heightened volatility in the coming months. Some institutions have raised index targets but expect a certain percentage of correction in the market over the next year. As earnings season, Fed policy, and market fund flows become new focal points, the upward path of US stocks in the second half may be far less smooth than in the second quarter.