Wall Street closes 2024 on the rise: the S&P 500 is on track to gain more than 20% for the second consecutive year

This Tuesday, December 31, the industrial benchmark Dow Jones rises 0.4%, while the S&P 500 grows 0.2% and the technological Nasdaq remains flat.

Despite deflating in December and not achieving the expected “Santa Claus boom” to close 2024, equities experienced a great year. He cooling inflation, solid consumer spending and a strong but not overheating labor market contributed to the papers. Investors were optimistic about strong profit growth at tech companies, and stocks rose after the president-elect’s re-election donald trump in November.

The blue-chip Dow index is up more than 12% this year, while the tech-heavy Nasdaq index is up more than 31%. “Inflation is declining, interest rate cuts are underway and profits are trending higherall of which reinforces sentiment and provides support for valuation,” said Terry Sandven, chief equity strategist at US Bank Wealth Management.

The consensus among big banks and research analysts appears to be continued growth through 2025 amid strong economic data, earnings growth and expectations of a business-friendly Trump administration. Analysts expect the S&P 500 to rise 14.8% in 2025according to FactSet.

But some others say the stock is overvalued currently and uncertainty over the speed of future Federal Reserve rate cuts, as well as looming geopolitical risks, could trigger a sell-off. With such impressive gains over the past two years, it is unclear if the bull market can last.

“We believe the chances of another positive year in 2025 are favorable given the high likelihood of economic growth and a Fed likely to cut rates next year,” Jeffrey Buchbinder, chief equity strategist at LPL Financial, said in a Sept. 30 note. of December. “But If resurgent inflation causes rate cuts to fade or speculation gets out of control, this bull market could struggle to survive next year.”

December was the worst month since April for the S&P 500 and Nasdaq, according to FactSet data, as selloffs in technology stocks dragged the indexes lower. In fact, it’s rare to see three consecutive years of 20% gains in the stock market, according to Callie Cox, chief market strategist at Ritholtz Wealth Management. “Everyone is expecting a good year next year, and that leaves a lot of room for disappointment,” Cox told CNN.

2024 for US markets

In September, the Fed began cutting interest rates after keeping them at decades-highs since the summer of 2023.. The combination of the Fed’s start to cut rates and strong economic growth boded well for US stocks.

The cooling of inflation boosted investor optimism, but After its last policy meeting of the year, the Fed signaled that there will be fewer cuts in 2025 than previously expected, which could undermine market momentum next year.

The “magnificent seven” tech stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) have accounted for more than 50% of the S&P 500’s total returns this year, according to data from S&P Dow Jones Indices.

And, since November 5, the shares of Magnificent Seven have accounted for more than 96% of the S&P 500’s gains. Nvidia (NVDA) stock was the year’s best performer, up more than 180%.

Likewise, the Nasdaq was the star of the main indices and increased thanks to the investor confidence in technology and AI. Palantir (PLTR), an AI-focused data company whose shares have risen nearly 370% this year, joined the Nasdaq in December.