The stock market has rallied to fresh all-time highs, with the S&P 500 setting a record intraday high of 4,842.07 before settling at a record-high close of 4,839.81 Friday afternoon.
The index is finally above its Jan 3, 2022 closing high of 4,796.56 and its Jan 4, 2022 intraday high of 4,818.62.
Thereβs a ton of reasons stocks are higher. Inflation has been cooling, and the Federal Reserve has been less hawkish. Economic growth has been resilient fueled by robust consumer spending by a financially healthy consumer. Sentiment has been improving. And so on.
For more, read: 9 big stories to watch in 2024 π
But the simplest explanation, which incorporates everything mentioned above, is that the outlook for earnings growth is positive, and earnings are the most important long-term driver of stock prices.
Most strategists are looking for double-digit earnings growth in both 2024 and 2025. According to FactSet, analysts expect S&P 500 earnings per share to grow 10% year-over-year to $244 in 2024 and 12% to $275 in 2025.
History teaches us that investors should expect unexpected and sometimes extended periods of volatility when stock prices fall from their highs.
But history also teaches us that the long game is undefeated as the stock market usually goes up.
Still, nothing tests an investorβs mettle like watching the value of your portfolio dip while in the throes of a market downturn.
So, kudos to those who held on β or even lowered their average cost β as the stock market once again rewarded investors who were able to put in the time.
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For more on why the stock market is up, read: