As U.S. stocks steadily rose in the first half of the year, investors began to speculate whether political uncertainty, potential changes in Federal Reserve policies, and the dominance of major tech companies in the market would make the remainder of 2024 more challenging.
Driven by strong corporate earnings, the resilience of the U.S. economy, and enthusiasm for artificial intelligence, stocks like chipmaker Nvidia surged, causing the S&P 500 index to rise 15% year-to-date. The index hit 31 new highs in the first half of the year, the most in any first half since 2021.
"The first half of the year was excellent for the stock market," said Tim Ghriskey, Senior Portfolio Strategist at Ingalls & Snyder. "The economy performed stronger than many expected, including the Federal Reserve."
If history serves as a guide, CFRA's research on election year markets since 1944 shows that after a positive first half, the stock market continued to rise 86% of the time for the full year.
But the outlook may not be smooth. Political uncertainty could have a stronger impact on asset prices as investors keep a close eye on the U.S. presidential election. A recent survey by JPMorgan showed that investors consider political risks in the U.S. and abroad to be key potential destabilizers for the stock market.
Investors are also increasingly concerned about the limitations of the market's rise, which has been concentrated in just a few tech giants. According to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, Nvidia's 150% stock gain this year accounts for about one-third of the S&P 500 index's total return.
