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S&P 500 index at a new peak: What's Behind the Market's Wild Ride

Jamie Cameron
22. 1. 2024
3 min read

The S&P 500 stock index recently reached an all-time high after a turbulent two years when it was confronted with inflation fluctuations, turmoil in the banking sector and economic unrest. We look at the factors behind this rise and what we can expect in the near future.

The S&P 500 $^GSPC-0.2%stock index recently experienced a stunning surge, reaching an all-time high. After two years of uncertainty that included soaring inflation, turmoil in the banking sector and economic unrest, the index has climbed to 4,839.8. What is behind this wild ride in the market?

One of the key factors is the expectation of lower interest rates and resilient growth in 2024. This hope has encouraged investors to buy stocks, with the S&P 500 index now by some definitions operating in a bull market since October 2022. by 25% since its peak in October 2022 the index began a gradual climb, and in 2023 ending with a 24% increase.

^GSPC

S&P 500

^GSPC
5,069.82 -$8.35 -0.16%
1 Day
+0%
5 Days
+1.11%
1 Month
+4.57%
6 Months
+14.68%
YTD
+7.26%
1 Year
+26.79%
5 Years
+81.93%
Max.
+28,705.38%

Another factor supporting the stock is optimism about artificial intelligence and the growth of large technology companies. Shares of the seven giants, up last year by 50 to 240%, making up about 28% of the S&P 500.

Lowering interest rates

The interplay between between government bond yields and equities has played a key role in market movements. The rising yields that have accompanied the Fed's efforts to raise interest rates, created competition for equities and increased the cost of borrowing. Expectations Rate cuts in 2024 has dragged yields lower in recent months. The Fed is hinting that an interest rate cut may not come in Marchbut later.

"March is too early a date for a rate cut. The CPI report shows that the central bank still has work to do in terms of containing inflation."
Loretta Mester, President of the Cleveland Fed

The US economy is showing resilience, supporting expectations of a "soft landing". However, high market concentration in in a few companies with huge market capitalizations and high P/Es ratios may pose challenges.

"Even after December's market-wide rally, market concentration in a handful of mega-caps - companies with very high market capitalizations - remains high."
BlackRock strategists

While S&P 500 index is celebrating a new high, investors are watching to see if the market holds up and how it will perform in the coming months. The future of the market is still uncertain, but current events suggest the wild ride may not be over yet.

Disclaimer: There is a lot of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.

Source.

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