Stocks are soaring, with the S&P 500 (^GSPC) approaching 5,000 for the first time.
To help explain this rise, we recently asked some of Wall Street's top strategists to contribute to the latest edition of the Yahoo Finance Chartbook. These seven graphs were submitted through January 26th and show how the stock reached this record level. It also builds the basis for market areas that are likely to rise in the future.
Little has changed in the market since we first published. The small-cap Russell 2000 index (^RUT) continues to trail the S&P 500 by a wide margin. And much of the gains in the major indexes have come from large-cap tech stocks like Nvidia (NVDA) and Meta (META). On the other hand, the positive future outlook for earnings remains.
Below, our strategists analyze the stocks that are driving the S&P 500 to new all-time highs.
Brian Belsky, Chief Investment Strategist, BMO Capital Markets
“The S&P 500 closed on June 8th more than 20% above its bear market low on October 12, 2022, a feat generally recognized as marking the beginning of a new bull market. For reference, the S&P 500 index ended June 8th at 4,294, and applying the 18-month average increase, the index level is, in other words, currently at We think it's a bull market and will continue to be a bull market, entering its second year. ”
Keith Lerner, Co-Chief Investment Officer, Trust
“With stocks trading toward all-time highs in valuations and consensus forecasting double-digit S&P 500 earnings in 2024, the key question for investors is: The question is whether we can maintain the profitability that we have achieved in the past.''In an environment where economic growth and inflation have slowed in recent years? ”
Goldman Sachs Portfolio Strategy Research Team, led by David Kostin
“Strong earnings growth and enthusiasm for AI drove the valuations of mega-cap tech companies significantly higher last year. At the same time, concerns about the Fed’s rate hike cycle drove most prices and valuations in the stock market. This has led to a wide disparity between the market-cap weighted S&P 500 Index's valuation and its average price multiple, and investors' hopes for a soft landing have widened the U.S. stock market in recent months. However, this valuation gap remains unusually large.”
Callie Cox, US Investment Analyst, eToro
“This is a strange bull market, and we can see that in the large gap in performance between large and small stocks. The S&P 500 has outperformed the Russell 2000 by 20 percentage points since its October 2022 low. It's very unusual for the beginning of a bull market, when the mood changes dramatically and risky stocks take control… But I think this is an encouraging chart. If you're optimistic about the economy and think the Fed can take soft policy, “if it lands, there could be an opportunity for small-cap stocks and other companies that were largely ignored during last year's recession fears.” No. This is a bull year where it feels like we're finally in a bull market.”
Read more of Callie Cox's chart discussion on Yahoo Finance Live here.
Tom Lee, Head of Research, Fundstrat
“I think small-cap stocks are a really good opportunity. The chart below shows [dark green line] This is the price-to-book ratio for small-cap stocks and large-cap stocks. [caps]. We're back to 1999 levels…top is the price ratio, look at that low [in] '99. Small-cap stocks outperformed for 12 years. So it's a great starting point. ”
Sam Ro, Editor, TKer
“S&P 500 earnings are at record levels and are expected to reach new records in 2024 and 2025. This is a tailwind for stocks.”
Steve Sosnick, Chief Strategist, Interactive Brokers
“To oversimplify, the National Association of Active Investment Managers (NAAIM) surveys its members and asks them about their net exposure… At the end of October, exposure was almost at a dead end, measured at 24.82. We get it: As the market improved, investors' exposure rose steadily, peaking at 102.71 at the end of December. Yes, as it turns out, survey respondents were long with net leverage. Calendar As the market changed, so did the need to play catch-up.These also coincided with other tipping points, which occur when exposure reaches a low “cash is king” level or when investments reach full value. I think that the [at or above] 100. ”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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