100 trading days in: Why 2024 is different

Yesterday marked the 100th trading day of the year. 2024 has been chock full of risks and opportunities, and as Memorial Day ushers in the unofficial start to summer, it’s worth taking stock of 2024 thus far—and why it’s different from last year.

Strong gains like this are rare and promising

100 trading days in, and the S&P 500 is up more than 10%. That’s well above the historical average for any full year. While past performance is no indication of future results, gains this strong also tend to signal more strength for the rest of the year. Since 1950, whenever the S&P 500 has gained at least 10% in the first 100 trading days, stocks have closed out the full year with an average return of about 25%. Seem familiar? This time last year, the S&P 500 was up over 8% and later closed the year with a gain of almost exactly 25%.

Yet, here starts the differences: This year’s rally has pushed the S&P 500 to new all-time highs – after a two-year hiatus. So far, 2024 has seen around 25 record highs. In years that the S&P 500 makes a new high, it usually makes around 30 on average. But, years like this one don’t happen often, and they are likewise promising. Whenever stocks have made this many all-time highs this early in the year, the full year has typically made more than 50 new records in all. 

The history lesson: More gains could be ahead.

Defying challenges: proving the forecasters wrong

Here’s another thing that’s different: This year’s strength has persisted even as predictions about its drivers have proven wrong.

Coming into the year, investors thought the Federal Reserve would cut rates more than 150 basis points (bps), as economists projected that inflation would fall close to 2%. Equity strategists across the Street calculated that would boost the S&P 500 around the 4,800 mark by the end of the year.

Fast forward, and the Fed stands to only cut once or twice this year, inflation may just break below 3%, and 10-year Treasury yields have surged 60bps (the 5th most for a year in the last 25 years). Most would have thought that foretold a tough time for markets. Yet, as we round out our first 100 days, the S&P 500 sits above the 5,300 level – far above even the most bullish of initial forecasts.

Of course, uncertainty around geopolitics, elections, and the macro debate linger. Markets closest to threats reflect some of the odds – both gold and silver have outperformed the S&P 500 this year, and oil prices remain elevated. But that seems to signal that investors are alert, not discouraged, by the risks.

The secret sauce: strength in profits

S&P 500 companies are having their best earnings season in nearly two years, growing profits about 6% over the prior year. The so-called “Magnificent Seven” heavyweights have driven a lot of this growth (and for good reason!), but a broadening has quietly taken shape. All 11 sectors have bested expectations, and eight are posting profit growth. 

Even more important: those earnings are higher quality. Profit margins (which show how much profit a company makes from each dollar of sales, after all expenses are deducted) are around 12% for the quarter. That’s a bump from last quarter and above the five-year average.

Markets are taking notice: 100 days in last year, the equal-weight version of the S&P 500 was roughly flat. This year, it’s up 5%.

AI isn’t just hype, and it’s not just big tech

Nvidia just closed out the Q1 earnings with a bang. The advanced chipmaker beat across every measure and signaled that demand for AI products isn’t slowing down from here.

It’s hard to believe that it was just a year ago that Nvidia “shocked” investors by signaling $11 billion of sales for the following quarter. This week, Nvidia said it expects $28 billion in the quarter ahead. Meanwhile, its stock has rallied far more than 200% over that time — all driven by earnings, while its valuation has actually fallen (from highs above 60x to about 35x today).

To echo Nvidia Founder and CEO Jensen Huang, “the next industrial revolution has begun…to produce a new commodity: artificial intelligence.” Already, focus seems to be shifting from questioning the importance of AI and towards analyzing how companies can generate return their investments – and how that eventually creates broader productivity benefits for the economy.

Investor enthusiasm is spreading beyond the giants at the heart of the innovation – and into demand for data centers and power transmission. Consider this: Looking at the S&P 500’s top 10 performers so far this year, five of those are utilities and industrials.

The impact won’t show up overnight, but in the meantime, Nvidia’s report was a litmus test for both AI and the market at large. The stock has garnered a degree of macro importance — it’s accounted for over 15% of the S&P 500’s return over the last year. That’s as much of an opportunity as it is a risk to watch. For now, it adds to our conviction in a strong economy accompanied by strong markets.

The takeaway: Embrace the change

100 days into the year, and 2024’s story is one of strength. Markets have powered on thanks to a strong economy and in spite of continued challenges. The profit-boosting potential of companies is real, growing, and further fueled on by the AI revolution. Investors should take note of the shift.

Reach out to your friendly neighborhood J.P. Morgan advisor to learn what this means for you and your portfolio.