The S&P 500 is on track to close 2024 with a 27% gain, having set 50 record highs this year. This two-year run is unmatched since the dot-com boom. While the economy is still recovering from the COVID-19 pandemic, the Federal Reserve’s interest rate hike was not enough to slow down the economy, allowing stocks to continue rising.
The artificial-intelligence industry has been a driving force behind the market’s performance, with companies such as Nvidia and Super Micro Computer experiencing significant gains. Wall Street analysts predict the S&P 500 could end 2025 at 6,600, for a 9% rise from current levels.
However, some experts caution that the market could experience a correction, pointing out that the S&P 500 has not had a drawdown of at least 10% this year. They also express concern that the market has climbed faster than companies’ profits, making it appear expensive. Anthony Saglimbene, chief market strategist at Ameriprise, urges investors to exercise caution, citing excessive optimism and a lack of recognition of potential risks.
Notably, similar market performance has been followed by downturns in the past, such as after 1999, when the market peaked and then fell due to the dot-com bubble bursting and the economy falling into recession. As investors consider the future performance of the market, it is essential to consider these lessons from history and potential pitfalls.