The year 2024 is off to a flying start on Wall Street. Friday January 20, the S&P 500 managed to surpass its previous record of 2022. The index reached 4842 points! Never seen. After two eventful years, this new peak reflects the spectacular rebound of the equity market across the Atlantic.
A plunge in finance followed by a powerful catch-up
Remember that between January 2022 and October 2022, the S&P 500 lost almost a quarter of its value. For good reason, the Covid-19 crisis and the monetary tightening of the Fed in the face of galloping inflation. The index even briefly fell below 4,000 points at the end of the third quarter of 2022.
But since these annual lows, the S&P 500 has regained nearly 38%, benefiting in particular from reassuring economic statistics and company results that are more solid than expected. This lightning comeback allowed the world of finance to erase losses and set new records.
Tech stocks come out of their torpor
Unsurprisingly, it is the American technological giants who have largely carried the stock market rebound from 2022-2023. Stocks like Meta, Amazon, Apple, Nvidia and Microsoft have jumped 50 to 70% from their lows, returning to their former splendor.
These tech heavyweights were heavily sanctioned during the market correction, losing more than half of their valuation for some. Investors are now anticipating a bright future thanks to innovations like conversational artificial intelligence or the metaverse.
But other traditional sectors such as energy, finance or health have also fueled the rise of the broader S&P 500 index since the end of 2022.
An S&P 500 record to qualify
Certainly, this new record erases the peak of January 2022. However, this threshold does not yet reflect a striking revival for the entire American finance and equity market. Thus, less than half (45%) of the 500 stocks making up the S&P 500 display a price higher than that prevailing at the start of 2022.
In other words, many stocks still remain far from their recent highs. Which encourages us to put the scope of the index record, largely driven by tech, into perspective. Furthermore, headwinds such as the economic slowdown and high interest rates could further rock the ship.
Despite these few nuances, the record crossing of the S&P 500 marks an important step after months of stock market uncertainties. Wall Street was able to bounce back and digest the shock of the rate hike orchestrated by the Federal Reserve. The coming months will tell whether the appetite for risk will lastingly outweigh recession fears.
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