The US’s S&P 500 index has risen greater than 20 per cent for the second yr in a row, as investor pleasure about synthetic intelligence fuels robust features in megacap expertise shares.
Regardless of a sell-off in December, the basket of blue-chip shares has ended 2024 up 23.3 per cent, following a 24.2 per cent acquire the earlier yr, marking its greatest two-year run of efficiency this century. The index has now made annual features of greater than 20 per cent 4 instances previously six years.
The rally has been led by large tech shares uncovered to AI. Shares in chipmaker Nvidia have gained 172 per cent over the yr, whereas Meta, which has additionally guess closely on the nascent expertise, has risen 65 per cent.
The S&P 500’s efficiency stands in distinction to European markets, with the Stoxx 600 gaining 6 per cent and the FTSE 100 rising 5.7 per cent. An MSCI index of Asia Pacific shares is up 7.6 per cent.
“The US [market] has not often been so distinctive,” mentioned Michael Metcalfe, head of macro technique at State International Markets.
Wall Avenue shares have additionally been lifted by the Federal Reserve’s cuts to rates of interest for the primary time for the reason that coronavirus pandemic and resilient financial information that has reassured buyers that the US is heading for a comfortable touchdown. Expectations of tax cuts and looser regulation throughout Trump’s second time period have additionally fuelled features in current months.
Financial institution of America strategist Benjamin Bowler mentioned Trump’s “laissez-faire economics, tax cuts and deregulation”, coupled with a possible “AI revolution”, meant the rally was prone to proceed into 2025. Though 2024 was undoubtedly “a very good yr” for the US inventory market, “it might solely be the start,” he mentioned.
However Chris Jeffrey, head of macro at $1.4tn-in-assets fund supervisor Authorized & Common Funding Administration, mentioned there are “fairly a number of crimson flags that ought to make us a bit cautious”.
The distinction between ahead price-to-earnings ratios in US and European shares may solely be justified if “you consider that the final 10 years [of tech-driven US earnings growth] can keep on, and keep on for an terrible very long time”, he added.
Traders have additionally needed to dial again their expectations of price cuts over the approaching yr. With inflation nonetheless above goal, forecasts launched by the Fed suggesting rates of interest will fall in 2025 by lower than beforehand hoped inflicted the S&P 500’s worst session in 4 months in early December. That damped investor exuberance after Trump’s election win in November, and helped push the index down 2.5 per cent in December.

Megacap tech shares together with the so-called “Magnificent Seven” — Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla — have been once more the dominant drive within the US market.
Bulls contend that large tech’s earnings development and AI’s potential to spur productiveness justify valuations.
Mike Zigmont, co-head of buying and selling and analysis at Visdom Funding Group, mentioned that, barring a collapse of income, the Magnificent Seven would stay extremely well-liked in 2025 due to the outsized returns they’ve delivered previously. “Traders simply search them out,” he mentioned.
However their features have prompted bearish commentators to attract comparisons between at the moment’s top-heavy market and the tech bubble that burst spectacularly on the flip of the millennium.
In distinction to the tech sector’s features, industrial supplies corporations have been among the many S&P 500’s worst performers in 2024 as China’s struggling financial system and fears of a US recession that has but to materialise dented buyers’ urge for food.
Bouts of volatility briefly interrupted the S&P 500’s in any other case regular ascent. Along with December’s fall, shares sold off sharply in early August, with falls extending past the tech sector.

Nonetheless, in the beginning of December asset managers’ internet lengthy publicity to the S&P 500 had risen to the very best stage in additional than 20 years, in response to Financial institution of America’s month-to-month survey of world fund managers, indicating “super-bullish sentiment”. In the meantime, retail investor enthusiasm for inventory market features over the following yr had by no means been larger, in response to Deutsche Financial institution.
Nonetheless, Citi’s intently watched US financial shock index has slipped in current weeks, indicating that financial momentum is trending weaker than anticipated. Some analysts say that sluggish development within the amount of cash circulating within the US financial system, excessive Treasury yields and a robust greenback all level to a possible financial contraction in 2025.
Traders have sold tech stocks in current days, whereas the Russell 2000 index of small-cap shares has slipped farther from its November document excessive. The equal-weighted S&P 500, which supplies a 0.2 per cent weighting to every constituent, has shed 6.6 per cent over the previous month.
The focus of returns in large tech will stay a “ache commerce” for funding funds which may solely maintain a lot of any single inventory, mentioned Charlie McElligott, a strategist at Nomura.
Traders “simply can’t personal sufficient” of the most important names, he added.