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This raises concerns about how much longer the rally can maintain its current momentum. The S&P 500 is nearing a rare milestone: a 20% or greater rise in two consecutive calendar years. As of Tuesday’s close, the index had crossed the 20% year-to-date mark, hitting its 41st record high of the year. Although the S&P 500 saw a slight pullback by the end of Wednesday, it remains near its peak. Following the Federal Reserve’s substantial interest rate cut, many investors are hopeful the index will push higher. It’s been a long time since the market experienced consecutive years of such strong performance. The last time was in 1998, during the dot-com boom, when the index posted four straight years of 20%-plus gains, starting in 1995. Before that, stocks hadn’t seen two consecutive years of such gains since 1955, before the S&P 500 was introduced. With the S&P 500 up 60% from its October 2022 low, according to FactSet data, investors are beginning to wonder how much further large-cap U.S. stocks can rise and whether this remarkable bull market may be nearing its peak. Some have suggested shifting away from large-cap stocks in favor of small- and mid-caps or looking for bargains abroad. Others argue that large-cap stocks still offer the best potential for returns, even as valuations have climbed to historically high levels. The comparison to the dot-com era is hard to ignore. While many experts are quick to point out the differences, it’s notable that technology stocks are once again leading the charge. Information technology and communication services now represent a significant share of the S&P 500’s market value, and valuations relative to sales are even higher than they were in 1999, according to FactSet. However, today’s companies are much more profitable than they were in the late 1990s. Recently, the S&P 500’s forward price-to-earnings ratio was 21.6, lower than the 24 times earnings seen in late 1999. Some analysts caution that high valuations could set the stage for below-average returns over the next decade. But others, like those at Yardeni Research, believe that strong earnings growth and improving productivity will continue to support the market, pushing it higher through at least 2030. While tech stocks may not dominate the market as much as they did earlier in this rally, other sectors—such as financials, industrials, and utilities—have begun to play a larger role. If these lagging sectors continue to gain momentum, the broader market could sustain its upward trajectory. Historically, following a 20% return, the S&P 500 has averaged a 9% gain the following year. While the pace may slow, history suggests that the rally could still continue. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

The U.S. stock market continued its strong upward momentum on Monday, with the S&P 500 and Dow Jones Industrial Average reaching new all-time highs. According to DataTrek Research, the S&P 500 could hit 6,000 by 2024, a target that now seems realistic after the Federal Reserve began cutting interest rates. The S&P 500 closed at 5,718.57, setting a fresh record, while the Dow also reached a new peak. Nicholas Colas, co-founder of DataTrek, noted that growth in the S&P 500 isn’t just being driven by technology and artificial intelligence. “Multiple sectors are contributing to earnings growth,” he said. Wall Street analysts forecast S&P 500 earnings per share to grow by 15.2% next year, up from 10% this year, with the biggest growth expected in cyclical sectors like energy, materials, and industrials. DataTrek projects earnings will rise to $258 per share over the next four quarters, a 12% increase from the previous year. With the Federal Reserve now easing interest rates, and the economy still growing, Colas sees the path of least resistance for stocks as higher. The S&P 500 is trading at 22.1 times forward earnings, higher than its five-year average of 19.5 but still below the 2020 peak of 23.2. Colas believes 6,000 is an “optimistic but achievable” target based on current earnings expectations. Stocks Rise After Fed’s Rate Cut The S&P 500’s new high comes after the Federal Reserve initiated a rate cut of half a percentage point last week, marking the start of its easing cycle. John Madziyire, head of U.S. Treasuries at Vanguard, said the probability of a “soft landing” for the U.S. economy has increased, as inflation cools under tighter monetary policy. He expects the Fed to lower its benchmark rate toward a neutral level of around 3%, down from the current target range of 4.75% to 5%. On Monday, the 10-year Treasury yield finished at 3.74%, while the two-year Treasury closed at 3.576%. Colas emphasized that reaching 6,000 for the S&P 500 is “hardly a stretch” given rising earnings and lower interest rates, representing just a 5.2% increase from last Friday’s close. The broader market also gained Monday, with the S&P 500 rising 0.3%, and both the Nasdaq Composite and Dow Jones Industrial Average up 0.1%. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Small-cap stocks are navigating a fog of uncertainty surrounding the U.S. economy and Federal Reserve policy, analysts say. Despite a strong rally over the past month, where the Russell 2000 Index (RUT) climbed 3%, outpacing the S&P 500’s 1.4% gain, questions remain about the sustainability of this momentum. Investors are grappling with concerns over the broader economic outlook and the Fed’s upcoming decisions on interest rates. After an impressive 13% surge in July, the Russell 2000 has been on a volatile path, retreating nearly half of those gains in August. Market experts, however, suggest that the bullish momentum in small-cap stocks could persist, driven by the potential for rate cuts and hopes for a “soft landing” for the U.S. economy—where growth slows but avoids recession. Why Rate Cuts Matter for Small Caps Smaller companies often benefit more from rate cuts than larger ones due to their higher debt levels and reliance on external financing. With the Federal Reserve expected to start reducing rates, many market participants are optimistic about small caps continuing to outperform the broader market. Furthermore, small-cap valuations appear attractive. For example, the S&P SmallCap 600’s forward price-to-earnings ratio is 16.7, compared to 23.4 for the S&P 500. Analysts expect earnings for small caps to grow at a faster pace, with forecasts of a 20% rise by 2025, versus around 15% for large caps, according to FactSet. “The Fed’s rate cuts could be a key catalyst for renewed interest in small-cap stocks,” said Matt Palazzolo, senior investment analyst at Bernstein Private Wealth Management. Impact of the Size of Rate Cuts While the Fed is expected to ease monetary policy, the size of the rate cut remains uncertain. Traders are split between expecting a 25 or 50 basis point reduction. A larger cut could support small-cap stocks further, though some worry it might signal a sharper-than-expected economic slowdown, potentially impacting corporate earnings. Jordan Irving, portfolio manager at Glenmede Investment Management, highlighted that sustained earnings growth for small caps is still needed for the rally to have long-term traction. However, Palazzolo noted that the magnitude of the cut is less important for small-cap performance in the long run, advising investors not to get too caught up in the near-term debate. ‘Value Versus Growth’ in Small-Cap Stocks The recent outperformance of small caps is also seen as part of the “value versus growth” trend. Sectors like financials and real estate, which are heavily represented in small-cap indices, have been key contributors to this rally. In the past three months, the S&P SmallCap 600’s financials sector rose 21.6%, while real estate advanced 18.1%. These sectors also outperformed within the large-cap S&P 500. This trend reflects broader shifts in the market, as large-cap tech stocks have faced headwinds, while value-oriented and income-generating sectors have gained favor. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com