According to Zhitung Finance APP, the S&P 500 Index increased by 23.3% in 2024, closing at 5,881.62 points, with gains in nine out of twelve months. Its corresponding SPDR S&P 500 Trust ETF also saw a gain of 23.3% this year.

This benchmark index has exceeded 20% annual growth for two consecutive years for the first time since 1997-1998, highlighting the extraordinary strength of the current bull market on Wall Street that began in October 2022. The growth this year has been driven by various factors, with the most significant being the Federal Reserve finally beginning its interest rate cut cycle, the AI boom driving tech stocks to continue climbing, and the divisive victory of former President Donald Trump in the elections.

Headlines for 2024: Economic data, Federal Reserve, technology and AI.

At the very least, it has been a remarkable year for the US stock market. Economic data and the Federal Reserve have dominated the headlines, with market participants eagerly watching key indicators such as inflation, the labor market, and economic growth, analyzing their impact on monetary policy.

The rampant inflation seen in 2022 has eased somewhat in 2023, and this trend has largely continued into 2024. Significant progress has been made in the first half of this year, and the core Personal Consumption Expenditures (PCE) price index, the inflation indicator preferred by the Federal Reserve, is nearing the Federal Reserve's 2% target. However, the PCE deflator has shown a sideways trend towards the end of the year.

Meanwhile, this year's job market has finally begun to cool down. Federal Reserve Chairman Jerome Powell believes that the current state of the labor market is looser than before the COVID-19 pandemic.

Nevertheless, inflation and labor market patterns are sufficient to prompt the Federal Reserve to cut interest rates for the first time since the pandemic outbreak. The Federal Reserve made a significant interest rate cut of 50 basis points in September, followed by two subsequent cuts of 25 basis points in November and December.

As data also indicates strong momentum in the US economy, and the Federal Reserve appears to have control over monetary policy, hopes for a soft landing in 2024 are rising, which has also fueled an increase on Wall Street.

Another major development in 2024 is the continued surge in Technology stocks driven by the AI boom. Perhaps there are no greater beneficiaries than $NVIDIA (NVDA.US)$This chip manufacturer consolidated its position as the leader in the AI chip market in 2024, with its stock price achieving an astonishing growth of about 178%, which also inflated its Market Cap, making it one of the largest publicly traded companies globally.

Several other major players among the seven Technology giants also achieved substantial annual gains.$Microsoft (MSFT.US)$up nearly 13%,$Apple (AAPL.US)$up about 31%,$Alphabet-A (GOOGL.US)$Increased by 37%,$Amazon (AMZN.US)$ Increased by 46%,$Meta Platforms (META.US)$and$Tesla (TSLA.US)$Increased by 67% respectively.

Traders in 2024 are also concerned about the huge valuation of tech stocks and their overly significant role in supporting market breadth.

But Truist Co-Chief Investment Officer Keith Lerner believes that the technology sector is far from being a bubble, with strong profit momentum.

Geopolitics and the impact of Trump.

In 2024, geopolitics also affected the market. Ongoing conflicts in the Middle East and the lack of signs of resolution in the Russia-Ukraine conflict have affected oil prices throughout the year.

But for Wall Street, no political event is more important than Trump's election victory in November. Since the former president announced his victory on election day,$S&P 500 Index (.SPX.US)$it has risen more than 7% by the end of the year, as people expect that Trump's second term will be based on corporate deregulation, tariffs, and tax cuts, boosting the economy and financial markets.

Looking ahead

Many in the investment community believe that the stock market will rise further next year but will not reach the levels seen in 2023 and 2024. Analysts point out that there are also adverse factors such as the Federal Reserve signaling a slowdown in interest rate cuts and the uncertainty regarding the full impact of Trump's policies.

Lerner from Truist stated in a research report on the 2025 outlook earlier this month: "We expect that the stock market bull run (both in terms of price and duration, lagging typical upward cycles) will be sustained by continuing economic expansion, which will enhance corporate profits, loosen monetary policies, and provide ongoing fiscal support."

"These positive factors are partially offset by rising market valuations and investor optimism, indicating that the threshold for positive surprises has been raised. These factors, combined with broader policy outcomes, suggest that this year's trends are more bumpy compared to the past year. Investors should seek to capitalize on opportunities that may arise in a prolonged upward trend," Lerner added.

As 2025 approaches, one thing is certain - the outlook is overall optimistic and full of expectations.

Editor/ping