The U.S. economy has faced significant challenges, including a pandemic, high inflation, and rising interest rates, yet the S&P 500 has grown at an unprecedented rate. While economic fundamentals typically determine stock prices, current market conditions defy explanation as previous theories have been undermined. The fundamental model has struggled since the 2008 financial crisis, during which the Federal Reserve's intervention aimed to stabilize the economy, leading to a puzzling scenario where the stock market continues to rise with little clarity on its sustainability.
The U.S. economy has recently weathered the worst pandemic in 100 years, the worst inflation in 40 years, and the highest interest rates in 20 years.
From 2019 through 2024, the S&P 500 grew by an average of nearly 20 percent a year, about double its historical average rate.
The uncomfortable fact about the historic stock-market run is that no one really knows why it's happening-or what could bring it to an end.
According to textbook economics, the stock market's value reflects what's known as 'fundamentals,' predicting potential future earnings.
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