Close Menu
    Facebook X (Twitter) Instagram
    • Contact Us
    • About Us
    • Write For Us
    • Guest Post
    • Privacy Policy
    • Terms of Service
    Metapress
    • News
    • Technology
    • Business
    • Entertainment
    • Science / Health
    • Travel
    Metapress

    S&P 500: Record Gains and What’s Next

    Lakisha DavisBy Lakisha DavisNovember 14, 2024
    Facebook Twitter Pinterest LinkedIn Tumblr Email
    S&P 500 Record Gains and What’s Next
    Share
    Facebook Twitter LinkedIn Pinterest Email

    2024 is set to close with another historic milestone for the S&P 500, with annual returns currently around 23%. Early forecasts predicted a flat market, but these projections have been repeatedly revised upwards throughout the year as the market consistently outperformed, delivering even greater returns.

    Despite geopolitical shocks from the Russian-Ukrainian conflict, turmoil in the Middle East, the U.S. presidential election, and declining interest rates, a robust labor market and inflation dropping below the most optimistic forecasts have fueled this impressive rally, which may still have room to grow. David Kostin, Chief U.S. Equity Strategist at Goldman Sachs Group Inc., expects that the index could reach an all-time high of 6,000 points by year’s end, with a 12-month target of 6,300 points. Kostin also recently released a report cautioning that, following such record gains, the market could enter a prolonged period of stagnation or decline, potentially lasting a decade, with nominal gains of just 3% (1% adjusted for inflation). While this might appear overly cautious in today’s bullish environment, history suggests caution is wise. Let’s dive into this further.

    A “lost decade” refers to a period when a 60/40 portfolio investor would have experienced negligible or negative real returns after inflation. This isn’t as rare as one might think; six such periods have been recorded, typically when either equity or bond markets were highly overvalued.

    In his weekly report, Jesse Felder illustrates that the S&P 500 currently holds the highest P/E ratio in 60 years ahead of expected Fed easing. The more overvalued a stock at purchase, the lower its return in the following decade. Currently, the entire U.S. stock market is valued above pre-Great Depression levels and close to the dot-com bubble’s peak.

    This analysis is critical for the long term. In the short term, the market may experience “irrational exuberance,” pushing valuations even higher. Yet, over the long term, valuations are a powerful indicator, and analysts like David Kostin predict a more bearish outlook for the coming decade.

    One closely watched measure for assessing long-term stock value is the CAPE (Cyclically Adjusted Price/Earnings) ratio, developed by Benjamin Graham in the 1930s and popularized by Nobel laureate Robert Shiller in his bestseller Irrational Exuberance. The CAPE compares current prices with inflation-adjusted average earnings over the past decade. After hitting a peak during the pandemic, when governments injected record liquidity, the CAPE recently reached new highs since the release of ChatGPT. It appears that a mix of liquidity influx and the AI boom is now helping drive the market.

    When analyzing stocks alongside bonds, Shiller’s “Excess CAPE Yield” metric, which subtracts the 10-year Treasury yield from the CAPE Yield, becomes relevant. This measure, widely used by top analysts, has only turned negative twice: during the Great Depression and the dot-com bubble.

    In any long-term analysis of the U.S. market, both equity and bond factors are essential. Exiting the market now could mean missing out on profits during a period of high exuberance, but staying mindful of the overall picture is crucial. Currently, we’re seeing historic highs, with tech giants lifting the rest of the market. The question is whether, and for how long, riding this wave will be advantageous — because, as history shows, downturns after such highs can be steep.

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email
    Lakisha Davis

      Lakisha Davis is a tech enthusiast with a passion for innovation and digital transformation. With her extensive knowledge in software development and a keen interest in emerging tech trends, Lakisha strives to make technology accessible and understandable to everyone.

      Follow Metapress on Google News
      Tom Hanks In Polar Express: Voice Behind Polar Express Magic
      August 28, 2025
      Ensuring Safety and Peace of Mind: A Comprehensive Guide to GPS Trackers for Kids
      August 28, 2025
      How Dietary Supplements Help Bridge Nutritional Gaps
      August 28, 2025
      From Waves to Wi-Fi: How This Developer Created a Full Social Network on Cruise Ships Without Internet
      August 28, 2025
      Generative AI Is Now Building the Factories That Will Define the Next Decade
      August 28, 2025
      How Clinical Pharmacology Services Improve Patient-Centered Drug Development
      August 28, 2025
      Expand Online games possibilities With Free Credit Deals and Special Rewards
      August 28, 2025
      How Puzzles Keep the Mind Sharp with Insights from Mitch Hanlon Fullerton
      August 28, 2025
      BridgemontEquity.com Review: A Platform Built for Today’s Investor
      August 28, 2025
      Momentum Indicators in Trading: Benefits and Examples
      August 28, 2025
      The Hidden Threat of AI Answers: How Fraudsters Are Exploiting Search
      August 28, 2025
      Steps to Take Immediately After an Accident in Santa Barbara
      August 28, 2025
      Metapress
      • Contact Us
      • About Us
      • Write For Us
      • Guest Post
      • Privacy Policy
      • Terms of Service
      © 2025 Metapress.

      Type above and press Enter to search. Press Esc to cancel.