Earnings reports from some of the largest banks allayed some anxiety about an uncertain economy, pushing the S&P 500 up nearly 2% on Wednesday. Further propelling this rally was the easing of inflation trends, which brought optimism that the Fed could be less tough on interest rates in the months ahead.
Robust wage growth and consistent retail sales comprised key drivers of performance within consumer-facing and financial sectors, which were key drivers of the gaining market. However, analysts said a healthy labour market and strong consumer spending should be able to keep the stock market riding high in 2025.
Also, market breadth continued to do better as small and mid-cap stocks joined the party along with the big caps. This bigger scale participation hints at what seems to be a healthier market environment on its own that could stave off the risk of too much reliance on some specific sectors or megacap stocks.
However, if inflation continues to moderate and earnings keep on growing, the S&P 500 could ride its current trajectory into 2025. Investors remain skittish about potential economic headwinds, like geopolitical risks and lingering interest rate headwinds. For now, the rally is largely based on optimism about how corporate strength works with macro stabilization.
This article first appeared on GuruFocus.
