Wall Street is holding its breath as U.S. stocks, led by the S&P 500, creep closer to record highs, fueled by hopes that U.S.-China trade talks will ease tariff tensions. With the SPY ETF at $602.19, just shy of its $613.23 peak, investors are riding a wave of optimism, but uncertainty over the talks’ outcome keeps markets jittery, leaving workers and retirees on edge.

The S&P 500, up 1.03% last week to 6,000.32, has rallied 10.6% since April’s tariff-driven lows, driven by a May deal cutting U.S.-China tariffs to 30% and 10%, respectively, for 90 days. Tech giants like Amazon and NVIDIA have led gains, with consumer discretionary stocks up 5.5%. The talks, ongoing in London, could extend the truce, boosting trade and corporate earnings. But fears of a breakdown linger, as China’s mineral bans and Trump’s fentanyl tariffs cloud progress. Fundstrat’s Tom Lee said, “A deal could spark a V-shaped recovery.”

The rally reflects broader market resilience. Strong May jobs data—139,000 new jobs—eased recession fears, while corporate earnings grew 12.8%, per FactSet. Yet April’s 7% S&P 500 swing shows volatility’s grip, with tariffs raising import costs 10–20%. Investors are eyeing Wednesday’s consumer price index for inflation clues, which could sway Federal Reserve rate cuts. “Markets are betting on de-escalation, but it’s not a sure thing,” said Barclays’ Emmanuel Cau.

Investors are hopeful but cautious. Seattle retiree Linda Park, with SPY in her portfolio, said, “I’m thrilled it’s up, but tariffs could wipe out my gains.” Tech worker Rajesh Kumar in Austin sees upside: “If trade eases, my stock options could soar.” Small business owners, like Ohio’s Emma Chen, worry about price hikes. Analyst Priya Seth from Columbia noted, “The market’s close to a peak, but a bad deal could trigger a sell-off.” Public polls show 55% of Americans expect higher prices if talks falter.

A successful deal could push the S&P 500 to 6,500 by year-end, per Yardeni Research, lifting retirement accounts and wages. But failure risks a 5% market drop, hitting small firms reliant on imports. The SPY’s 25% year-to-date gain, led by aerospace and tech, could stall if tariffs spike. Rural communities face pricier goods, squeezing budgets.

The talks’ next steps are critical. Positive signals, like potential tech export relief, buoy markets, but China’s hardline stance looms. The Fed’s July rate decision and corporate forecasts will shape sentiment. “It’s a tightrope,” Seth said. For now, investors and workers hope Wall Street’s climb continues, but they’re bracing for bumps ahead.