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Bull Market Momentum: S&P 500’s Record-Breaking Rally


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Factors Driving the Bull Market

Several factors have contributed to the S&P 500’s bull market momentum. Signs of slowing inflation and a dovish pivot from the Federal Reserve in late 2023 accelerated stocks’ advance, leading to a 24 percent annual gain for the S&P 500. Additionally, the recent rally in chip stocks, fueled by optimism over artificial intelligence’s business potential, has further lifted the index.

Bull Market Confirmation

The S&P 500’s record-breaking close on Friday, January 20, 2024, confirms the index’s entry into a bull market. This milestone was reached by the index gaining 35 percent since its bottom on October 12, 2022, and closing at 4,839.81 after a 1.2 percent rise in Friday’s session.

Historical Performance of Bull Markets

Historically, the S&P 500 has been in a bull market for approximately 85 percent of the time since 1950. During the six bull markets in the last four decades, the index has notched an average gain of nearly 260 percent. Moreover, data from Clearbridge Investments shows that in 13 of the previous 14 instances when the S&P 500 set an all-time high for the first time in more than a year, the rally continued over the next 12 months, with an average return of 13.9 percent.

Earnings Outlook

Despite the S&P 500’s strong gains in 2023, profit growth was lackluster, with earnings expected to have risen by only 2.8 percent for the full year. However, investors are anticipating a stronger performance in 2024, with earnings estimated to increase by 10.9 percent.

Broadening Market Participation

While the S&P 500 has experienced strong gains, the broader market’s participation remains a concern. The small-cap Russell 2000’s 4.1 percent decline in 2024 compared to the S&P 500’s 1.4 percent gain suggests that the bull market’s benefits are still concentrated among Wall Street’s most valuable companies.

Artificial Intelligence’s Impact

Excitement over artificial intelligence technology has also fueled the stock market’s momentum. Companies like Nvidia, now the world’s most valuable chipmaker, have experienced significant gains, with its stock tripling in value last year. This trend continued in 2024, pushing Nvidia’s shares to a record high on Friday.

Technology Stocks Leading the Charge

The S&P 500’s rally since October 2022 has been largely driven by technology-related giants, including Microsoft, Tesla, and Google parent Alphabet. These stocks accounted for 62.18 percent of the index’s total return in 2023, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. The S&P 500 technology sector has surged over 70 percent since the October 2022 low, while the communication services sector, home to Meta Platforms and Netflix, is up nearly 60 percent.


The S&P 500’s record-breaking close confirms a bull market since October 2022. Factors like easing inflation, a dovish Fed, and the rise of artificial intelligence have fueled this momentum. Tech giants like Microsoft, Tesla, and Alphabet have significantly contributed to the S&P 500’s gains.

References

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