One of the most hated bull markets in history continued in 2024, building upon the prior year’s gains in stellar fashion. The S&P 500 delivered a total return of 25% and has now entered the third year of its latest bullish run.
The former headwinds that exacerbated the market’s decline two years ago evolved into bullish tailwinds. An underlying downward trend in inflation combined with better-than-expected corporate earnings helped propel the S&P 500 back to record highs.
Unique catalysts such as the artificial intelligence theme resulted in the more aggressive pockets of the market returning to the forefront. The three sectors responsible for the majority of annual gains in 2024 included information technology, communication services, and consumer discretionary.
These are the sectors we’d expect to outperform in a bull market; defensive sectors like consumer staples lagged last year, as did energy-related stocks.
Market Breadth Wanes Late as Volatility Spikes
We also saw cyclical sectors that had been underperforming in 2023 (including industrials and financials) come on strong last year as the market rally broadened out and participation improved. While the positive breadth trend seemed to reverse a bit at the end of the year, a healthy consolidation is often a good thing when it comes to the sustainability of bull markets.
There’s no doubt that an otherwise strong 2024 was met with heavy institutional selling in December. Markets came under pressure as volatility increased heading into the New Year. But the late-year selling pressure didn’t stop the S&P 500 from logging its best back-to-back annual gain in nearly 30 years:
Zacks Investment Research
Image Source: Zacks Investment Research
The so-called “Santa Claus Rally” period, which consists of the final five trading days of the previous along with the first two trading days in January, is statistically one of the best 7-day stretches of the year. The S&P 500 is negative thus far during the period, which could spell trouble for 2025 returns according to historical precedent. Still, the index has 2 more days left to turn things around, and let’s also remember that these seasonal tendencies are far from bulletproof (as 2024 showed).
The media-hyped concentration risk at the very top of the cap-weighted S&P 500 would have us believe that investors are becoming increasingly reliant on a smaller number of companies to lead their portfolios. But only 1 of the top 5 S&P 500 constituents (by index weight) is included in the best 3 performers for 2024.
S&P 500 Gold: Palantir
A leading provider of artificial intelligence systems, Palantir PLTR took the top spot in 2024. A Zacks Rank #2 (Buy) stock, the company benefitted last year from a bevy of brokerage upgrades and renewed government contracts.
Just last month, Palantir announced that it extended its long-standing partnership with the U.S. Army, further aiding the delivery of its Army Vantage capability used to perform essential missions and enable quicker decision-making.
The intelligence software and data analytics provider generates nearly 60% of its revenue from government agencies. Earlier in December, the federal government issued the company a higher rating for secure cloud computing services, which should accelerate the handling of extremely sensitive data as part of Palantir’s cloud offering.
Palantir was added to the S&P 500 back in September. The stock rewarded investors last year with a better than 340% return:
StockCharts
Image Source: StockCharts
Analysts covering PLTR remain bullish and have increased their fiscal 2025 EPS estimates by 9.3% in the past 60 days. The Zacks Consensus Estimate now stands at 47 cents per share, reflecting a 24% potential growth rate versus last year.
Zacks Investment Research
Image Source: Zacks Investment Research
S&P 500 Silver: Vistra Energy
Vistra VST was the second-biggest gainer last year in the S&P 500. A provider of power and electricity, the company has been one of the largest beneficiaries of the surge in demand for power by data centers.
Dynamic adoption of artificial intelligence and the increased acceptance of nuclear energy as an emissions-free power source are two bullish themes driving utility stocks. Long considered a ‘boring’ corner of the market, utilities have come roaring back as power demand is set to reach new heights in the years to come.
Vistra topped earnings expectations for the first time all year in its latest quarterly (Q3) release, while also announcing an additional $1 billion for its share repurchasing program. The company was added to the S&P 500 back in May. VST stock surged more than 260% in 2024:
StockCharts
Image Source: StockCharts
The stock’s nuclear rise may continue in 2025 as analysts have increased their fiscal 2025 EPS estimates by 8.3% in the past 60 days. The Zacks Consensus Estimate now stands at $6.13/share, pointing to an impressive 36.8% growth rate versus last year.
Zacks Investment Research
Image Source: Zacks Investment Research
S&P 500 Bronze: Nvidia
Rounding out the top 3 in terms of S&P 500 returns last year was none other than chip giant Nvidia NVDA. Chip stocks were the main recipients of the tech resurgence and AI explosion over the past two years, and Nvidia (NVDA) is the top dog of the semiconductor world.
Considered most preferred by datacenter operators, Nvidia’s GPUs are likely to help the company grab a larger market space. Companies like Amazon, Microsoft and Alphabet are expanding their global operations, driving demand for Nvidia chips. By applying its GPUs in AI models, Nvidia is expanding its base in untapped markets like automotive, healthcare, and manufacturing.
The company is eyeing robotics as a critical growth area, with plans to launch its next-generation compact computer for humanoid robots – dubbed “Jetson Thor” – in early 2025.
NVDA shares cooled off a bit to end the year but still delivered a remarkable 171% return:
StockCharts
Image Source: StockCharts
Nvidia torched earnings estimates last year, surpassing even the most optimistic projections. A Zacks Rank #2 (Buy) stock, NVDA continues to witness rising estimates as the company looks to close out its fiscal fourth quarter on a strong note.
Analysts covering NVDA have increased their Q4 EPS estimates by 7.69% in the past 60 days. The Zacks Consensus Estimate now stands at $0.84/share, reflecting a staggering 61.5% growth rate versus the year-ago period. Revenues are anticipated to climb 70.7% to $37.7 billion during the quarter. The company is expected to deliver its quarterly results in mid-to-late February.
Zacks Investment Research
Image Source: Zacks Investment Research
These are phenomenal growth rates for a company of this size, and it’s no wonder NVDA continues to be a leading stock.
Final Thoughts
While technology companies mainly led the way in 2024, other sectors such as consumer discretionary also played a large part in the S&P 500’s annual performance. The bulls are hoping that this blockbuster year will be followed by more strength ahead in 2025.
The beginning of a new year is a great time to take a step back and analyze what went right the previous year, and more importantly, what we could have done better. Studying the top performers is a great way to prepare for the year ahead.
From all of us here at Zacks, we wish you a Happy New Year. Cheers to making 2025 your most successful investing year yet!
*Disclosure: Vistra (VST) is a portfolio holding in the Zacks Income Investor portfolio. Nvidia (NVDA) is a portfolio holding in the Zacks Headline Trader portfolio.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
