US Stock Market Celebrates Best Year Since 1997

The US stock market is celebrating a momentous year, with the benchmark S&P 500 index delivering its best year-to-date performance in 26 years. As of the end of July, the index had surged approximately 21%, marking its most significant gain in the first seven months of a year since 1997, according to data from S&P Dow Jones Indices.

The July rally proved to be a decisive success, with both the Nasdaq Composite and the S&P 500 extending their winning streaks to five consecutive months, a feat not seen since 2021.

However, the beginning of August brought some market hesitation, with investors closely scrutinizing the mixed bag of second-quarter earnings reports, leading to some wavering in stock prices. The summer travel season traditionally ushers in volatility on Wall Street due to reduced trading volumes.

This remarkable market performance owes much to the "Magnificent Seven," a group of stocks known for their dual qualities of growth and defensiveness, as well as their contributions to artificial intelligence advancements. Notable members of this group include tech behemoths Nvidia, Apple, Amazon, Alphabet, Meta Platforms, Microsoft, and Tesla.

The positive momentum was further fueled by an impressive earnings season, with approximately 81% of the 292 companies in the S&P 500 surpassing analyst expectations for their second-quarter results, as reported by Refinitiv Lipper. Notably, Nvidia stands out, soaring an astounding 220% year-to-date through July, followed by Meta Platforms with a remarkable 165% jump, Carnival gaining 134%, Royal Caribbean adding 121%, and Tesla increasing by 117%.

In addition to strong individual stock performances, the broader market rally has been underpinned by growing optimism about inflation cooling, the potential avoidance of an economic recession, and the Federal Reserve's approaching conclusion of its rate-hiking cycle. This upbeat sentiment is evident in the outperformance of the S&P 600 index, which tracks the performance of stocks from smaller companies, during the last month.

It is essential, however, to highlight that the market gains have not been uniform across all stocks. An equal-weighted version of the S&P 500 index has underperformed year-to-date through July, indicating variations in performance among individual stocks within the index.

The US stock market's stellar performance throughout the year so far has instilled confidence among investors, and market analysts remain cautiously optimistic about the market's trajectory as it navigates the complex dynamics of the global economy.

Also Read: Stock Market Kickstarts August with Mixed Earnings Amidst July's Record Rally