In 2024, the excitement surrounding the U.S. stock market’s performance has reached new heights, thanks in part to a positive economic outlook and the anticipated cuts in interest rates, coupled with the burgeoning potential of artificial intelligence in business. This perfect storm of factors has propelled the S&P 500 to a remarkable increase of more than 10% in just the first quarter, its best start since 2019. The index hit a milestone record high for the first time in two years in late January, a continuation of its strong rally from late 2023, without significant pullbacks, reaching over a dozen new highs in the early part of 2024. The Nasdaq Composite too joined the rally, marking its first record peak since November 2021 in late February.
The investment community’s optimism is partly grounded in the anticipation of a “soft landing” for the economy, a scenario where inflation slows without leading to a sharp downturn. This sentiment is backed by nearly two-thirds of fund managers, according to a March BofA Global Research survey, with only 11% fearing a “hard landing.” Supportive measures from the Federal Reserve, which held its forecast of three rate cuts this year while presenting an improved economic outlook in its recent meeting, have played a crucial role. Despite a rise in Treasury yields to 4.2% from 3.86% at the year’s start, the stock market has remained buoyant. Within this upbeat market, specific companies have stood out. Nvidia, for instance, has seen its shares soar by over 80%, driven by its leading AI chip technology, while Meta Platforms has also performed strongly, with a 37% increase following its first dividend issuance. However, not all have fared as well, with Apple’s shares dipping 11% and Tesla’s falling by 29%, reflecting the diverse fortunes of the “Magnificent Seven” tech giants, which have significantly contributed to the S&P 500’s gains this year.
