2024 Proves to be a Stellar Year for the S&P 500
Though 2024 is not finished yet, the S&P 500 (SNPINDEX: ^GSPC) is set to close the year impressively.
At the start of the year, many Wall Street experts expected only modest gains. However, the S&P 500 has soared 28% year-to-date as of Dec. 4, aiming for one of its best annual performances on record. Factors driving this growth include the artificial intelligence (AI) boom, interest rate cuts, a strong economy, and the anticipated changes from the incoming Trump administration.
This surge follows a strong 2023 when the index rose by 24%. There’s strong evidence to suggest that 2024 is shaping up to be a highly bullish year for the stock market.
By Dec. 4, the S&P 500 had hit an all-time high on 56 occasions, which ranks as the fifth highest since 1929. While there is still time left in the year, it could reach even greater milestones.
Image source: Getty Images.
Investor Sentiment Amid Record Highs
Currently, the market is still in a new bull phase that began less than two years ago. Yet, some investors seem cautious, suspecting a possible bubble. Notably, Warren Buffett’s Berkshire Hathaway has sold stocks each quarter this year while increasing its cash reserves and even chose not to buy back its shares for the first time in six years. Additionally, concerns have arisen around the significant investment in AI infrastructure, with some questioning whether the consumer market can support it.
Stock prices appear elevated; at times, the S&P 500’s price-to-earnings ratio has reached 30.3. This indicates that stocks are, comparatively, pricier than historical norms.
Comparing 2024’s all-time high performance to previous years reveals intriguing patterns, as shown in the table below:
| Year | Annual Gain for S&P 500 |
# of Days S&P 500 |
|---|---|---|
| 1964 | 13% | 65 |
| 1995 | 34% | 77 |
| 2017 | 22% | 62 |
| 2021 | 29% | 70 |
| 2024 YTD | 28% | 56 |
Data source: Bilello.blog and others. YTD = year to date.
Historically, after years like 1964 and 1995, the S&P 500 often gained again the following year. In 1965, for example, it rose another 9%. However, the market experienced a downturn in 1966, dropping 13% as overheating concerns became evident.
In contrast, 1995 marked the start of the dot-com boom, which didn’t peak until 2000.
On the other hand, the follow-up years for 2017 and 2021 did not carry the same momentum. After reaching high points in 2018, the S&P 500 declined 6% due to rising interest rates, fears of a trade conflict with China, and potential government shutdowns. Similarly, in 2022, stock prices dropped 18% as the pandemic-era bull market experienced a cooling off, leading to tech sector slowdowns.
Interpretations for Investors
While stock market investing lacks definitive rules, understanding historical trends can guide decisions today.
The data presented suggests that when new all-time highs emerge, a market pullback may follow. While predictions for 2025 remain uncertain, given current stock valuations, a cooling period might be realistic. Still, significant changes could occur over the year ahead, especially with a new administration and ongoing AI developments.
Additionally, longer-term trends indicate that the market consistently reaches new all-time highs, even after downturns. In fact, by 2019, the S&P 500 had rebounded to reach a record high, highlighting why investments made in 2022 could yield benefits.
Ultimately, investing in the S&P 500 for the long haul involves ups and downs, yet it has proven to be a reliable wealth-building strategy. This principle remains crucial, irrespective of what the market may present in the coming year.
A New Opportunity Awaits Investors
Feel like you’ve missed your chance in acquiring top-performing stocks? This could be your moment.
Occasionally, our expert analysts propose a “Double Down” stock recommendation for firms they believe are poised for growth. If you’re concerned that you missed your opportunity, now may be among the best times to invest before it’s too late. The statistics speak volumes:
- Nvidia: if you had invested $1,000 when we doubled down in 2009, you’d have $369,349!
- Apple: had you invested $1,000 in 2008, you’d now have $45,990!
- Netflix: if you invested $1,000 in 2004, you’d be looking at $504,097!
Right now, we’re promoting “Double Down” alerts for three exceptional companies, and this opportunity may not present itself again soon.
Discover 3 “Double Down” stocks »
*Stock Advisor returns as of December 2, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
