Wall Street's 2024 Price Goals Shattered by S&P 500 Rally

With less than two weeks left in 2024, U.S. stocks are poised to post their best annual performance in years. The S&P 500 has exceeded even the most optimistic forecasts from Wall Street analysts.  As of the December 17 close, the index sits 650 points higher than the most bullish year-end target.

Year-to-date, the S&P 500 has gained nearly 27%, closely mirroring its 2021 performance and trailing the 29% surge of 2019 by only a small margin. According to Goldman Sachs, historical data shows that November and December are typically the strongest months for equity returns, positioning the S&P 500 to potentially break its recent annual growth records.

At the start of the year, fears of a potential economic recession in 2024 dominated market sentiment, but those concerns ultimately proved unfounded. The U.S. economy has performed exceptionally well, with GDP growth nearing 3% and the labor market in its best shape in years.  Employment levels are at historic highs, layoffs remain minimal, and retail sales continue to show strength.

This solid economic backdrop has translated into robust corporate earnings growth. Measured by S&P 500 earnings per share, corporate profits are on track to hit record highs this year.

Most importantly, inflation has steadily declined throughout the year, approaching the Federal Reserve's long-term target of around 2%. With the inflationary pressures of 2022 largely under control, the Fed has initiated its first rate-cutting cycle since the onset of the COVID-19 pandemic in March 2020.

So far in 2024, the Fed has reduced rates by 75 basis points, and markets widely expect an additional 25-basis-point cut at this week's policy meeting. Lower interest rates typically stimulate the economy and support equity markets by reducing borrowing costs, which in turn boosts corporate profitability and valuations.

Moreover, last month's U.S. presidential election concluded without controversy, removing a significant uncertainty for the market. The election outcome propelled stocks to their best monthly performance of the year, with the Dow and S&P 500 climbing 7.5% and 5.7% in November, respectively.

Investors are now focused on President Trump's pro-business agenda in his second term, including potential tax cuts and deregulation. Markets are also optimistic that Trump's tariff threats will remain more rhetorical than practical.

NVIDIA continues to dominate headlines with a streak of stellar earnings that have propelled its stock, along with other AI-related equities, to record highs. Wall Street analysts anticipate this momentum will persist into 2025, fueled by NVIDIA's next-generation Blackwell GPUs hitting the market.

In 2024, the broader market has participated in the rally, with financials leading sector gains year-to-date, followed by utilities. Unlike 2023, this year's market strength has been more evenly distributed across stocks rather than concentrated in a handful of high performers.

Conclusion

The combination of robust economic growth, falling inflation, a favorable interest rate environment, and optimism surrounding the incoming administration's policies has set the stage for a remarkable year in U.S. equities. With the S&P 500 shattering Wall Street's expectations, 2024 has cemented itself as a standout year for the stock market, leaving investors optimistic about the road ahead.