The S&P 500 index (SPY) notched its 53rd record high for 2024 on November 29, rising 0.56% to 6,032.44 during a shortened Black Friday trading session.
This milestone caps off an extraordinary rally that has propelled the index 27% higher year-to-date, building on a stellar 26.3% gain in 2023.
Historically, such back-to-back annual returns of over 20% are exceedingly rare, having occurred only eight times since the index’s inception in 1957.
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Retail and semiconductor strength fuel market gains
Nine of the S&P 500’s 11 sectors closed higher in Friday’s broad-based rally, with retailers and semiconductor stocks leading the charge. Retail giants Macy’s Inc. (NYSE: M) rose 1.6%, and Target Corp. (NYSE: TGT) gained 1.7% amid robust holiday shopping projections.
Adobe Analytics estimates that online sales during Cyber Week will grow 7% year-over-year to $40.6 billion, accounting for 16.9% of total holiday season spending.
Semiconductor stocks also contributed to the rally, with Nvidia (NASDAQ: NVDA) up 2.15% and Lam Research (NASDAQ: LRCX) rising 3% on optimism sparked by a Bloomberg report suggesting that new U.S. restrictions on chip exports to China may be less severe than initially feared.
The Philadelphia Semiconductor Index surged 1.5%, further bolstering the broader market.
Market optimism on pro-business policies and election tailwinds
Investor optimism has been bolstered by President-elect Donald Trump’s victory earlier last month, with markets betting on tax cuts and deregulation to boost corporate profits and spur economic growth.
However, concerns over inflationary pressures and a potential slowdown in rate cuts persist as President-elect Trump’s tariff pledges create ripples across markets.
Auto stocks faced significant losses this week after Trump vowed to impose steep tariffs on imports from Canada, Mexico, and China. The impact extended to Canadian railroad companies, which saw declines, while both the Mexican peso and Canadian dollar weakened against the U.S. dollar.
Fed policy boosts market momentum
Hopes for further rate cuts by the Federal Reserve continue to underpin the rally. Inflation is nearing the Fed’s 2% target, and the 10-year Treasury yield dropped to 4.17%, its lowest level in weeks.
Moreover, the CME Group’s FedWatch tool indicates a 66% chance of a 25 basis-point rate cut in December, which would bring the target range between 425 and 450 bps.
Fed minutes released earlier this week suggest policymakers’ concerns about an economic slowdown have eased, signaling a measured approach to monetary policy in the coming months.
Historical trends highlight caution amid optimism
Historically, consecutive years of over 20% gains for the S&P 500 are rare. According to The Kobeissi Letter, there have been only eight instances in the past 75 years when the S&P 500 posted back-to-back annual gains of over 20%.
Of these, the index ended positive the following year six times, with declines only in 1977 and 2000, the latter marking the peak of the Dot-com bubble.
Interestingly, the S&P 500’s previous all-time highs in February 2020 and December 2021 also followed invalidated bearish candlestick patterns, which initially signaled reversals but instead led to new highs.
According to Kpak, these patterns were later followed by major corrections, including the pandemic-driven crash in 2020 and the downturn in early 2022.
Analysts warn that similar trends in 2024 could merit close attention as the index continues its record-breaking run.
Despite its stellar performance, current valuations remain a point of concern. The S&P 500 is trading at 38 times cyclically adjusted earnings, reminiscent of levels seen during the late 1990s before the Dot-com crash.
Nevertheless, analysts, including those at Bank of America, remain optimistic about the rally’s sustainability, citing supportive monetary policy and easing bond yields as key drivers for further gains
Featured image via Shutterstock
