The S&P 500 keeps going north

The higher the S&P 500 climbs, the more comparisons are made to the dot-com crisis. At the beginning of the 21st century, inflated valuations of internet companies triggered a collapse in the US stock market. In contrast, today’s tech giants are performing very well. The third-quarter corporate reporting season is the strongest in four years. Already, 60% of issuers have reported their results. Most of them exceeded earnings forecasts.

Bank of America notes that global equity ETFs attracted $17.2 billion by the end of the week on October 29th. Any positive news about artificial intelligence boosts US stock indices. For example, news of a multi-year $38 billion deal between Amazon and OpenAI, as well as Microsoft’s permission to supply NVIDIA chips to Saudi Arabia, led to a rally in the stocks of the Magnificent Seven.

The US stock market is supported by a seasonally strong November. At the end of the last month of autumn, the Dow Jones index rose by an average of 1.2%, the S&P 500 by 1% and the Nasdaq Composite by 2.1%. UBS Global Wealth Management forecasts a 10% increase in US corporate earnings in 2025 and a 7.5% increase in 2026. A combination of strong earnings reports, investments, and the introduction of artificial intelligence technologies, along with the Fed’s monetary expansion cycle, will enable the S&P 500 to continue its rally.

At the same time, the enormous costs of AI are leading to a decline in the aggregate cash flow of Meta, Alphabet, Microsoft and Apple. Investors are becoming more selective. For example, Meta Platforms’ increased investment in artificial intelligence led to a decline in the company’s stock price. Conversely, information about how Alphabet will spend its money allowed its shares to rise.

Formally, the S&P 500 could come under pressure from the shutdown, weak business activity statistics and divisions within the Fed. Not all FOMC members are prepared to cut rates in December. They are concerned about persistently high inflation. However, a further slowdown in the US economy will force the Fed to throw it a lifeline, inspiring the broad stock index to new records.

The FxPro Analyst Team