US stocks hit new historical highs, forcing short sellers to abandon the "exceptionalist end theory" as funds accelerate backflow into American tech giants.

Notice that Wall Street has rebounded strongly from the tariff turmoil and hit a historical high, significantly narrowing the gap with European stock markets. This puts investors who bet on the end of the "exceptionalism era" in the US market face a tough test. In the second quarter of this year, the blue-chip S&P 500 index soared 10%, far outperforming the European Stoxx 600 index and other major global stock indexes, which only rose by less than 2% during the same period. The strong performance of the US stock market has defied market expectations - investors previously believed that Trump's chaotic tariff policies would trigger a continuous rotation of funds into other markets (especially in Europe). While Europe had shown strength earlier in 2025 due to expectations of defense and infrastructure spending, funds are now flowing back into technology stocks that have led the market in recent years. Chep Perkins, Chief Investment Officer of Putnam Investments, said, "In the second quarter, we saw the market revert to its old ways." Europe's Stoxx 600 index is still slightly ahead with a 7% increase, leading the S&P 500's 5% gain since the beginning of 2025 due to fiscal stimulus policies and expectations of regional economic integration reforms. But recent weak performance in the European markets has raised concerns, with investors questioning whether Germany's trillion-euro "at all costs" defense infrastructure plan can sustain its momentum. "The crux of the European market has always been corporate profits," said Dirk Malachi, Managing Director of SLC Management, "US companies have solid balance sheet support, while European trading is more speculative - for example, it all depends on whether Germany can implement the infrastructure plan." European economic data has yet to confirm market optimism. The EU Commission revised growth forecasts downward last month, and the latest survey shows a decline in business confidence in the EU and the Eurozone in June. In contrast, the US employment data has been stronger than expected, the unemployment rate remains stable, and has not been significantly impacted by the trade war. US stocks have received double support: retail investors continue to "buy on dips," and companies are buying back stocks on a record scale. Nvidia hit a historical high last week, Palantir surged 50% in the second quarter, and Coinbase's stock price doubled, showing that funds are still chasing technology and cryptocurrency assets. With tech giants leading the way, the anticipated broad market rally has not materialized. Equal-weighted indexes like the S&P 500 have underperformed traditional market-cap weighted indexes this year. Some investors still insist that funds will exit the US stock market, and global investors are reevaluating their overallocation to US dollar assets. Although the performance gap in the second quarter has narrowed, the US dollar is still down 13% against the Euro, and US bonds are under pressure due to debt issues. Goldman Sachs analysts point out that even considering a higher return on equity, US stock valuations are already too high, and that the "era of asset diversification has just begun." As the Trump administration is about to end the 90-day tariff suspension period and enter into trade negotiations with various countries, some investors are warning that Wall Street may experience turmoil again. Luca Paulini, Chief Strategist at BNP Paribas Asset Management, believes that the long-term convergence of US and European economic growth will narrow the gap in the stock market, but the early-year expectations for European growth may have been overextended. "The truth may lie somewhere in between: the US is not a paradise, and Europe is not a hell."