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  • 1440 Daily Digest

Year-End Market Rally

US stock markets are on pace to wrap up the year with double-digit gains. The S&P 500, which is hovering near its all-time high, closed up 25% for the year yesterday. The technology-heavy Nasdaq closed up 45% for the year and is nearing its best year since 2003. The Dow closed up 14% for the year, setting a seventh record high for the month yesterday.

This year's rally marks a reversal from 2022, when all three major indexes closed lower (S&P 500 -19.4%, Dow -8.8%, Nasdaq -33.1%), ending the worst year for markets since 2008. Gains in 2023 have been partly due to the rise of artificial intelligence and big tech stock increases, primarily with a group known as the Magnificent Seven: Alphabet, Amazon, Apple, Meta, Microsoft, Tesla, and Nvidia. 

A softening economy, marked by a cooling labor market and easing inflation, paired with next year's expected interest rate cuts also helped drive stock market gains. The annual inflation rate was at 3.1% in November, about a percentage point away from the Federal Reserve's annual target rate (see 101).

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