A few stocks have caused a significant move in the S&P 500 at 80 percent, with a similar occurrence happening last in 2019. These three companies, Apple, Nvidia, and Magnificent Seven are responsible for this jump, which has happened only six times in the past 50 years.
These spectacular years include 1990, 1995, 1998, 1999, 2020, and 2023, when the S&P 500 performed beyond the S&P 500 Equal Weight index (EWI) by no less than five percentage points. This has a ripple effect pattern on the following year, which means 2025 can expect a big move.
The stock market might move significantly in 2025
From previous history, predictions say the index will return 17 percent in 2025 provided the S&P 500 is still performing at a minimum of 5 percentage points ahead of the EWI by the end of the year. The Federal Reserve also made its first move in four years to slash interest rates, which will likely drop further in a few months.
According to global investment strategist at JPMorgan Chase, Sarah Stillpass, some of the most favorable years for the S & P 500 happened when interest rates got slashed. Lower interest rates result in more investing, leading to a boost in corporate profits and stock prices.
Risk and reward
Although the S&P 500 is performing better, it is driven by a few companies, and being overreliance on them can be risky should there be a drastic dip. While it is a good time to get in for profit, weak earning results means a bear market and losses for impatient investors.
There is also the clause of too much attention on tech-related stocks such as Apple, Microsoft and Nvidia, which account for over 20 percent of the S&P 500. Investors are advised to diversify into other sectors to avoid a bad boomerang.