Some of the world’s biggest money managers are wary of chasing the stock rally further in the second half of 2025, bracing for more volatility.

Markets are wrapping up a wild six months that saw the S&P 500 plunge 19% from peak to trough, before it recouped those losses. The index closed at a record high on Friday after the ceasefire between Israel and Iran revived the risk-on rally.

The recent bounce is not enough for many institutional investors, who cite a litany of risks confronting equities. The fast-approaching deadline for tariff deals, a mixed outlook for earnings and questions around America’s debt and leadership of the Federal Reserve loomed large in interviews with investment firms. They’re also mindful of US-China tensions, potentially eased somewhat by the countries’ just-announced trade framework.

“We are more cautious than constructive,” said Joe Gilbert, a portfolio manager at Integrity Asset Management LLC. “The outlook for the second half of the year is always framed by the starting point, and that starting point from the perspective of valuation and earnings growth is not that attractive.”

Gilbert’s view is typical of the downbeat sentiment among institutional investors from Singapore to London and New York as June draws to a close. It’s also reflected in equity positioning by global asset managers, which remains well below historical levels.

Here’s more about five key risk factors that stock investors said they are watching closely for the rest of the year:

Tariff Deadline

An immediate threat to the equity rally lies in the July 9 deadline set by President Donald Trump to reach trade pacts with major US partners. The stakes are high as exporters without a deal will be hit with much higher tariffs than the current 10% level applied to most countries.

The UK is an outlier, having secured an agreement on paper. The European Union and the US believe they can clinch some form of trade agreement in time, Bloomberg News reported Friday, while talks with India, Japan and many others continue. Bloomberg News has also reported that the US is nearing agreements with Mexico and Vietnam.

Still, investors got a reminder of the risks of sudden turbulence in this area of international relations when Trump on Friday said he would terminate trade talks with Canada in response to a 3% digital services tax.

Investors generally agree that a tariff shock for markets on the scale of “Liberation Day” in early April is unlikely. There are also hopes that the deadline could be pushed out. Still, Anthi Tsouvali, a strategist at UBS Global Wealth Management, said that while “markets are not complacent anymore, there are risks until a firm deal is announced.”

Tsouvali said she has a neutral stance on equities. “There’s going to be a lot of uncertainty, a lot of volatility,” she said. “We are not taking active risk.”

Earnings

Corporate resilience has been a key support for the sharp rebound in US stocks since April. Analysts on average expect earnings for S&P 500 companies to rise 7.1% this year before an acceleration in 2026, according to data compiled by Bloomberg Intelligence.

That will be put to the test within a few weeks as second-quarter results roll in. The last earnings season saw companies across the world pull forecasts for the year, citing cost increases and weak consumer sentiment.

A June survey by the Business Roundtable showed C-suite executives were more pessimistic than three months earlier, with fewer expecting to ramp up hiring or capital spending. That said, Trump’s $4.2 trillion tax-cut package — facing a key Senate vote in the week to come — could provide a boost to companies struggling with tariff hikes and costs to rejig their supply chains.

“Within this more challenging environment, you’ve got to think that those growth expectations have got to come down,” said Louise Dudley, a portfolio manager at Federated Hermes. For the broader market, “perhaps the most that we can expect is a sideways move from here,” she said.

Geopolitics

An end to hostilities between Israel and Iran has pulled oil prices lower, easing a worry for equity investors about how this would feed through to inflation and complicate the Fed’s path to interest-rate cuts. Still, the boost to sentiment is fragile as uncertainty swirls around the future of Iran’s nuclear program.

“Despite this temporary relief, we continue to see geopolitical risk as structurally elevated,” said Francisco Simón, European head of strategy at Santander Asset Management. The firm retains an underweight stance on equities, favoring a “cautious and selective approach,” he said.

The fraught relationship between the US and China also keeps investors on edge. They will be scouring for details of a trade framework the two sides said this week that they have reached. Among key points are whether the agreement will free up access to Chinese rare earths for American companies and remove obstacles for Chinese tech companies in obtaining cutting-edge US chip technologies.

US Debt, the Fed

The US lost its last top credit rating in May amid deepening investor concerns over its ballooning debt. Meanwhile, Trump’s tax-and-spending bill is expected to add trillions to federal debt over coming years.

“We know that the problem is not going away,” said Neil Robson, head of global equities at Columbia Threadneedle Investments. He noted that a market meltdown sending bond yields surging and equity valuations plunging remains a low probability event. “But we got to be aware,” he said.

For Nicolas Wylenzek, a macro strategist at Wellington Management, the handling of the Fed Chair’s succession is also an important issue for investors. Trump said Wednesday that he has three or four people in mind to follow Jerome Powell when his term expires next year.

A risk mentioned by some investors is that the US experiences its own version of the UK’s 2022 “Liz Truss moment.” That was “partly triggered by uncontrolled spending, in combination with some questioning of the independence of the Bank of England,” Wylenzek said.

“Could we see something similar?” he said. “There’s a risk that markets suddenly start to get worried that the next chairman of the Fed is not as independent as they maybe have been in the past.”

Valuations

With stocks trading at 22 times earnings in the next 12 months, the S&P 500’s valuation is well above its 10-year average of 18.6 times. Firms like Wellington and AllianceBernstein are among those expecting the multiple to remain elevated due to future rate cuts and the resilience of big tech companies. But others see the lofty price tag as an obstacle to buying more stocks.

“US equity valuations, particularly in market-capitalization-weighted strategies such as the S&P 500 Index, may have further to adjust if US economic conditions deteriorate,” said David Chao, a global market strategist at Invesco Asset Management. “Markets outside of the US mostly trade at lower multiples, and we think the gap with the US will continue to narrow.”