We have entered a new bull market. That’s without question, given that the S&P 500 index closed at an all-time high on Friday. The index surpassed not only its prior record intraday, but it also topped its closing highs from January 2022.
The index’s record close on Friday is significant in that it affirms we are not merely just bouncing from a bear market, especially when comparing the S&P 500 from its October 20222 low. The S&P 500 is up more than 35% in that span. Thanks to strong gains in Apple (AAPL), the Dow Jones Industrial Average on Friday added 395.19 points, or 1.05%, to end at 37,863.80. The tech-heavy Nasdaq Composite was Friday’s biggest winner, adding 1.70% to 15,310.97.
Just as impressive, the Nasdaq-100, the smaller, more tech-focused index, gained 1.95% to also hit a record high. Tech has been the main catalyst during this rally. On Friday alone, the tech sector added 2.35%, netting more than 4% returns during the trading week. As it stands, the major averages are now in positive territory for 2024. This is, in part, because the fervor for the “Magnificent Seven” stocks, which powered the Nasdaq’s 44% rise in 2023, has resumed.
These mega-cap tech giants consisting of Alphabet (GOOG , GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) made investors rich in 2023 when it appears that the long-expected recession was averted. The reason for their collective popularity, which can’t be overstated, stems from their exposure to high-growth technologies, such as high-end software and hardware, cloud computing and artificial intelligence, the seven stocks have more than doubled the return of the S&P 500 over the past decade.
Armed with tons of cash on the balance sheet, strong cash flows and excellent leadership, the Magnificent Seven are well-positioned to continue leading their respective markets in 2024. In other words, even as these seven stocks are at a combined market capitalization of more than $10 trillion, there are still many reasons to expect them to keep winning in 2024. As to the overall market in 2024?
The prospect remains bright if troubled segments of the economy can recover in 2024, creating a bullish scenario where the rest of the market catches up to the Magnificent Seven. While the three closely-watched indexes have gained an average of 5%, all eleven S&P 500 sectors have climbed during that span, and prompting the term “everything rally.” This past week, investors were seemingly snapping up everything from stocks and bonds to gold and crypto. Both Bitcoin and ether rose last week, with Bitcoin rising 2% at $41,763.87. Even the price of oil rose last week, with U.S. crude booking a weekly gain of 1%.
Essentially, following a short-lived market pullback to start the new year, investors are now gobbling up everything with both hands. Investors have good reasons to feel warm-and-fuzzy about various asset classes in 2024. U.S. consumer sentiment improved in January, hitting the highest level in two and a half years. Preliminary January reading on the overall index of consumer sentiment came in at 78.8, according to the University of Michigan.
This is the index's highest reading since in almost three years. It also marks a 10-point jump compared to 69.7 in December. This sentiment reading is thanks to growing optimism about not only inflation, but also jobs data, both of which are improving economic signs. That inflation is easing support economists' views that the Federal Reserve will start cutting interest rates at some point in the first quarter.
All told, the overall sentiment and market trajectory remains positive. While implications of future inflation data will continue to shape market movements, there are tons of indications that the new bull market is here to stay. As such, staying invested is the best way to profit.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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