"Almost without question, the primary fuel for this multi-year period has been a sense of overwhelming optimism around artificial intelligence and a shift toward an easier interest rate environment. Investors have been pouring capital into mega-cap technology leaders like NVIDIA ( NASDAQ:NVDA) and betting that AI is going to fundamentally reshape global productivity in the very same manner that the internet did almost two decades ago."
"This sense of enthusiasm has driven the S&P 500 to a 26% gain in 2023 and a similarly strong return of 23% in 2024. With just over a week left of trading days in 2025, the double-digit ascent three years in a row is all but a sure thing. Beyond the conversation around AI, the Federal Reserve's pivot toward lower interest rates has also acted as something of a significant tailwind for stock valuations."
The S&P 500 recorded 26% in 2023 and 23% in 2024 and is poised for a third consecutive year of double-digit gains in 2025. Overwhelming optimism about artificial intelligence and a shift to easier interest rates powered substantial inflows into mega-cap tech stocks such as NVIDIA. The Federal Reserve cut rates three times since 2024, lowering borrowing costs and bolstering equity valuations. A rare market signal that has only appeared once before has emerged amid this momentum. That signal historically preceded notable market developments, creating a cautionary warning for investors about potential risks ahead.
Read at 24/7 Wall St.
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