The S&P 500 is on track to deliver gains of more than 20 percent for the second year in a row.
If the index achieves this, it would be only the third time consecutive gains of that size have been recorded in the last century, according to Deutsche Bank.
The S&P 500 tracks the performance of the 500 largest U.S. companies, including major technology companies like Amazon and Apple, and banks like JPMorgan Chase and Bank of America.
The index has typically earned an average annual return of 10 percent since its inception in 1957.
But the S&P 500 gained more than 24 percent in 2023, and is now up about 26 percent year over year after last week’s rally following Donald Trump’s victory in the presidential election.
The S&P 500 is on track to generate gains of more than 20 percent for the second year in a row
Rising stock market returns are good news for Americans who invest in 401(K)s and IRAs, which tend to be invested in major market indices.
That means when Wall Street profits, so do your savings.
The stock market soared following the news that Trump had won a second term.
The S&P 500 reached the 6,000 point mark on Friday, an all-time high.
A landslide victory for Trump boosted bets on a pro-business agenda, with expectations of lower corporate taxes and looser regulations.
“Protests after close elections have been the historical norm, as we have noted previously,” Parag Thatte, a strategist at Deutsche Bank, said in a note on Friday.
“But the current one is clearly faster than the previous ones.”
Thatte said the market’s rally was “exceptional,” even before last week’s surge to record highs. CNBC reported.
The S&P 500 is still within the upward trajectory seen over the past two years, but is now near the top, he said.
According to Dow Jones Market Data, the last time the index gained more than 20 percent in two consecutive years was in 1997 and 1998, in the midst of the dot-com bubble.
It had also increased more than 20 percent in 1995 and 1996, reaching four years in a row in total.
Going back further, stocks haven’t seen such strong rallies two years in a row since 1955, before the S&P 500 was even introduced. Market surveillance reported.
The stock market soared following the news that Trump had won a second term
The Federal Reserve also cut interest rates again last week, amid a slowing labor market and cooling inflation.
The central bank made a 25 basis point cut on Thursday, lowering rates to between 4.5 percent and 4.75 percent.
Historical data also implies that further growth could be on the horizon for the S&P 500 this year.
Wall Street investment bank Oppenheimer analyzed the 11 years in which the S&P 500 jumped more than 20 percent during the first 217 days of trading.
In those years, the smallest additional gain from then to the end of the year was 0.5 percent, CNBC reported.
That means that, if history repeats itself, the S&P 500 should end 2024 above 6,000.
The latest rally also came as an interest rate cut by the Federal Reserve eased pressure on the U.S. economy.
The central bank made a 25 basis point cut on Thursday, in line with economists’ predictions, lowering rates to between 4.5 percent and 4.75 percent.
Thursday’s decision is the second time the Federal Reserve has cut rates this year, amid a slowing labor market and cooling inflation.
Authorities voted to cut interest rates by 50 basis points in September, lowering benchmark borrowing costs from 23-year highs.
