New York City, New York – Wall Street celebrated a major milestone on Friday as US equities reached an all-time high. The S&P 500 index experienced a remarkable surge, rising 1.2% to close at 4,839.81, surpassing the previous record set on January 3, 2022. The index also achieved a new intraday high of 4,842.07 during the trading session.
After a strong end to 2023, the S&P had been on the verge of breaking records for the past month. However, the market faced a slowdown at the start of the year due to disappointing economic data, which dampened optimism about the timing of potential interest rate cuts by the US Federal Reserve. Despite Friday’s positive performance, the S&P 500 only saw a 1.5% gain in January, compared to a remarkable 16% rally over nine consecutive weeks in late 2023.
While some investors anticipate continued volatility in the market, there is widespread optimism about an upward trend in the coming months. Jeff Mills, chief investment strategist at Bessemer Trust, stated, “If the economy continues to grow — which we expect it will — and if inflation continues to trend down, that should be quite good for the average stock.” He believes this environment will allow earnings to prosper and gradually push the market higher throughout the year.
The Nasdaq Composite, which is heavily influenced by technology stocks, has also experienced a significant uptick of nearly 20% since late October. However, it still needs to gain another 5% to surpass its previous record closing level.
The rally observed since October was primarily driven by shifting rate expectations, with investors betting that declining inflation would prompt the Fed to initiate rate cuts. Lower interest rates typically boost stocks by reducing the appeal of low-risk assets like Treasury bonds. Simultaneously, investors are hopeful that corporate earnings will rebound as the US central bank successfully manages inflation without causing a severe recession.
The broad gains across the stock market have been fueled by this optimistic combination, with smaller companies outperforming the dominant tech groups that led the charge in 2023. However, the recent surge that propelled the S&P to a record was once again driven by large tech companies like Meta, Microsoft, and Nvidia, all of which reached new highs on Friday. In contrast, the equal-weighted version of the S&P 500 has fallen back 1% so far this year.
The lack of breadth in this market rally has raised concerns about its sustainability. Ronald Temple, chief market strategist at Lazard, remarked, “A rally driven by seven to ten stocks is not one that most people think can last three years.” Nonetheless, he remains optimistic, saying, “What still gets me excited about the US equity market is that much of it is still reasonably priced.”
As the market continues its volatile journey, investors eagerly await further economic developments and corporate earnings reports, hoping for a prosperous year ahead.