The stock market has never looked like this before – no matter who is president

As President-elect Donald Trump prepares to begin his second term in office, investors are debating how his proposed policies will play out in the stock market. While the answer is not clear, what is clear is its impressive position in the market as it holds the country’s leading position.

For one, 2024 marks the second consecutive year the S&P 500 (^GSPC) has risen more than 20%, a feat not seen since 1997-1998.

There were a few reasons for the huge gains: The Federal Reserve cut interest rates for the first time in four years in 2024 and made two more cuts, effectively lowering borrowing costs, which is good for both businesses and consumers.

Corporate income growth accelerated during the year. Despite a brief growth scare that spooked investors in late summer, the U.S. economy ended 2024 on strong footing. And enthusiasm over the prospect of generative artificial intelligence has ignited a fire among investors, giving AI darling NVIDIA ( NVDA ) and its “Magnificent Seven” peers a boost.

Highlighting the rally, most of last year’s gains were made by just a handful of players. In fact, the S&P 500 has never been so strong against the top 10 stocks in the index. About 40% of the index. Many of these stocks, including The Magnificent Seven, have contributed the lion’s share over the past two years.

While many say the S&P 500’s focus is the key risk to the bull market, it’s also the main reason U.S. stocks have moved higher. Big-tech earnings were seen broadly outpacing the results of 493 companies in the S&P 500, supporting investors’ bias toward America’s biggest tech names.

Meanwhile, the S&P 500’s high price-to-earnings ratio, set by FactSet at 21.5, is well above the five-year average of 19.7 and the 10-year average of 18.2. At 21.5, the S&P 500 was only higher than this level in 2021 during the post-pandemic and dot-com bubble era.

Several Wall Street strategists pointed out that the index’s rising upside for large tech companies supports higher valuations.

“50% of today’s market is asset-light growth companies, technology, healthcare, high-margin industries,” Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Securities, told Yahoo Finance in December. “In the 80s, it was 70% of production. So I think the exercise of comparing today’s multiples with historical averages is fraught with problems.”

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