The bull market galloped through the first half of the year in a mostly celebratory fashion, kicking up its heels and hitting new highs as if to taunt experts' modest expectations. So far this year, the S&P 500 is now up 14.5%, finishing Friday at 5460. That's behind an 18.1% gain by the Nasdaq composite but well ahead of the lagging 3.8% lift by the Dow Jones Industrial Average.
Nvidia is the best performers in the S&P 500 as the first half nears an end and excitement around artificial intelligence shows no signs of easing. Shares have surged 149%. Eli Lilly is another big winner in the index, up 55.32%. Broadcom and Meta have added 43.83% and 42.45%, respectively. Tesla drops 20.36% in H1, losing over $160B in market valuation so far in 2024.
As the midpoint of 2024 nears, the stock market forecast for the next six months still looks bullish.
Though risks remain, the reasons for the hopeful mood stack up like tiers of a layer cake. The resilient economy serves as the base. On top of it, corporate earnings rest comfortably. Favorable investing themes, starting with AI investment but by no means limited to it, provide more food to fuel stocks. And dividend growth adds another layer to feast on.
Senior earnings analyst at FactSet Butters noted that the forward 12-month price-to-earnings ratio for the S&P 500, at 20.7, is running well past the 10-year average of 17.8 times earnings. So the stock market seems to think that earnings will continue to rise at a favorable clip. Adam Parker, founder and CEO of Trivariate Research, made a similar point in an early June interview on CNBC, citing research that found 75% of large-cap companies are forecast to expand their profit margins over the next 20 months.
Yardeni Research forecasts S&P 500 operating earnings at $250 in 2024, up 12% vs 2023. These figures compare with analysts' consensus forecasts of $244.70 in 2024.
Besides, the major theme in 2024 is artificial intelligence. According to tech executives, the deployment of generative AI across enterprises, governments and other organizations is accelerating. This has spurred demand for shares in leading companies in the areas of chips, cloud computing, software and data centers.
That's not the only bullish theme in 2024. The stock market has seen companies benefit from robust demand for new housing, life-extending drugs and medical devices, novel restaurant concepts, and innovation in shoe design and styles.
For conservative and long-term investors, the prospects for dividend growth look tasty as well. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, dished up a positive projection for cash payouts. He expects a 6%-6.5% rise in the "actual cash payments" this year, to $629 billion.
Matt Burdett, portfolio manager at Santa Fe, N.M.-based Thornburg Investment Management, noted that "over time, dividend growth has exceeded inflation. In the time since World War II, the spread between dividend growth and inflation has been more than 200 basis points."
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