Despite election uncertainty and widespread economic discontent caused by stubbornly high prices, the U.S. stock market reached new highs in 2024. Once again, the so-called "Magnificent Seven", i.e. Apple, Amazon, Microsoft, Meta, Alphabet, Tesla and Nvidia were the main drivers behind the rally, as the accounted for more than half of the S&P 500's 25-percent return for the year. Fueled by an ongoing AI investment cycle, Nvidia alone saw its share price surge 171 percent, contributing more than 20 percent to the market-cap-weighted index's full-year return.
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And while 2024 marked the fourth year of 20+ percent gains in the past six years for the S&P 500, such returns shouldn’t be taken for granted. In fact, 2023 and 2024 were the first back-to-back years where the S&P 500 gained more than 20 percent in two and a half decades. From 1995 to 1998, the index even clocked four consecutive years of 20+ percent gains plus another 19.5-percent increase in 1999. That long-time rally was followed by the bursting of the dot-com bubble in 2000, however, which resulted in three consecutive down years of the S&P 500.
Thankfully, back-to-back down years are a very rare occurrence, as our chart shows. According to Macrotrends.net, the S&P 500 has only seen consecutive years of negative returns three times since 1957, in 1973/1974 and in 2001/2002/2003 with returns getting worse in the second (and third) down year on each of those occasions. Since 1957, the S&P 500 has ended the year in the red 18 times including 2022. 15 times out of 18, the index returned to growth the next year.
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According to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, Nvidia's 171-percent return in 2024, contributed more than 22 percent to the S&P 500's overall return, putting it miles ahead of Apple, Amazon and Meta, who accounted for 7.4, 5.9 and 5.5 percent of the index' full-year return, respectively. At the other end of the scale, Intel, which was the largest negative contributor to the index's performance, followed by Adobe, Boeing, CVS Health and Nike. All of these companies saw their share prices drop by 25 (Adobe) to 60 percent (Intel), but due to their limited weight in the index, their performance only accounted for minus 4.2 percent of the index's overall performance, dragging its full-year return down 0.83 percentage points on aggregate.