Stock investors are embracing risk on the cusp of new highs

Mint

26-06-2025

Forget TACOs and memes, we're in the era of the YOLO trade.
War, tariffs, a spending bill that adds to the ballooning U.S. deficit. There have been no shortages of major worries for the market lately, and yet stocks seem to continually shrug off each new worry, with the S&P 500 trading comfortably over 6,000 and not far from its all-time high.
The philosophy that 'you only live once' encourages people to embrace risk and take chances while they can. That idea might help explain why investors have been so relentlessly optimistic recently, despite a barrage of headlines that might have been expected to bring the mood down.
The S&P 500 High Beta Index, which measures the performance of 100 constituents in the S&P 500 that are most sensitive to changes in market returns, is a good example. It, along with the Invesco S&P 500 High Beta exchange-traded fund, are up well over 6% this past month, and SPHB has soared more than 41% since the April 8 post-Liberation Day lows. That compares to the S&P 500, which is up 2.9% in the past month and has risen some 22% from April 8, and the iShares MSCI USA Quality Factor ETF, which is up an anemic 1.2% in the past month and just under 18% since April 8.
Investors might have expected just the opposite, with so many potential geopolitical and domestic boogeymen in the background.
Still, the moves do make sense in light of the ongoing artificial-intelligence trade and the initial tariff meltdown.
Capex spending is usually a negative for tech stocks, notes Joseph Mezrich, founder of investment strategy firm Metafoura, but has actually been a driver over the past month: 'The positive turn for capex spending in large-cap tech likely reflects investors' view that the massive capex spending for AI is now a good thing. That would show up as a positive for beta (and tech).'
The SPHB is, not surprisingly, heavily weighted toward the tech sector, with plenty of semiconductor companies that have benefited from the resurgence of AI enthusiasm, notes Adam Turnquist, chief technical strategist for LPL Financial. So with the Nasdaq Composite up just over 4% in the past month and the iShares Semiconductor ETF rising some 12.5%, it isn't surprising that the high-beta ETF has also been taken along for the ride.
Yet we're also still feeling the impact of the tariff rollercoaster, he says: High-beta stocks were one of the most oversold categories after the Liberation Day announcement, SPHB was 'a logical spot' for anyone who was looking to 'add risk and have a high tolerance for volatility.'
Moreover, the tariffs were just one of a long series of events coming out of Donald Trump's administration that would have been shocking under any other leader, but have now become commonplace—to the point that investors are getting desensitized to his bombastic moves.
'Investors are acclimating to the Trump White House, so the shock factor has worn off a little and the headlines get a little less potent,' Turnquist says.
There are some other contributing factors, too, he notes: Investors have been positively conditioned to buy the dip in recent years, there is optimism that the government is moving more toward pro-growth policies, the first-quarter earnings season wasn't nearly as bad as expected, and Treasury yields have backed off from their highs.
Overall though, investors just seem interested in taking the bull market by the horns.
Write to Teresa Rivas at [e-mail]