A year ago, stock investors and strategists were bracing for potential turbulence in 2024, worried about the possibility of a hard landing for the U.S. economy, and that the Federal Reserve's rate cuts might come too late to prevent the risk of a hard landing. Now, U.S. stocks in 2024 are about to enter the 'Hall of Fame' of bull markets.
At the beginning of the year, few anticipated that the S&P 500 index's annual increase would rank among the best in history, nor did many expect that the market sentiment would be so optimistic, driven by a handful of tech giants, to the extent that one risk event after another was downplayed, triggering another round of strong rebounds.
By the end of 2023, many economists believed that an economic slowdown was the main scenario, with inflation remaining a major concern, making monetary policy and corporate profit outlooks unclear. However, now that interest rates have fallen, growth remains strong, and earnings are rising, pushing the market up, even though risk events are frequent, volatility remains low.
The Nasdaq 100 index and the S&P 500 index have both risen over 20% this year. The representative company of artificial intelligence, NVIDIA, almost tripled in 2024, with all tech stocks following closely behind.
After a stellar performance in 2023, many market participants do not expect U.S. stocks to continue their strong rise this year. Columbia Threadneedle Investments' global chief investment officer, William Davies, stated, "The U.S. stock market has seen an unusual surge, the U.S. economic growth has remained strong, and inflation is steadily decreasing."
U.S. stocks have experienced moderate volatility this year, with only one significant decline: a pullback during the summer, where there was a slight sell-off around early August, but the downturn lasted less than a month and failed to breach the 10% threshold usually seen as a correction.
Despite the persistent geopolitical threats, neither the escalating conflicts in the Middle East, the ongoing Russia-Ukraine conflict, nor the U.S. presidential election has triggered any deep-rooted concerns.
Even the European stock markets have performed well. Despite the uncertain economic outlook and the collapse of the French and German governments, most benchmark indices in the region are up this year. However, the surge in U.S. stocks has been so strong that the gap between the STOXX Europe 600 index and the S&P 500 index will mark one of the worst years. Due to political turmoil, the French stock market has also been a rare underperformer among developed markets in 2024.
As the new year approaches, current market sentiment leans toward optimism, with no one on Wall Street expecting a significant pullback, although there is some skepticism about whether the stock market can perform exceptionally for three consecutive years. Davies said:
"The earnings growth expectations for the U.S. in 2025 remain optimistic, around 15%, and this ongoing resilience is somewhat surprising, as we approach 2025, the global economy is not without risks."
Article reposted from: Jin Ten Data
