S&P 500 rose to a record high on Thursday, edging above the peak reached in early December, marking a continuation of its positive momentum following recent inflation data and President Trump’s renewed commitment to reducing oil prices, a key driver of inflation.
Index increased by 0.5 percent on Thursday, extending a rally that began more than a week ago after data showed a greater-than-expected slowdown in inflation for December. With Thursday’s rise, the S&P 500 is up by 4 percent in the first three weeks of the year, signaling investor confidence as inflation concerns ease.
Inflation Concerns and Market Recovery
the recent rally comes after weeks of market stagnation, with investors initially worried about the inflationary impact of President Trump’s policies, including new tariffs and a mass deportation program. Se policies had the potential to push up consumer prices and wages, creating uncertainty in the market.
Re were growing concerns that rising inflation would prompt the Federal Reserve to maintain higher interest rates for a longer period, affecting consumer borrowing costs and potentially weighing on stock market valuations. However, recent inflation data has eased some worries, giving investors confidence. The market received an additional boost on Thursday when President Trump, speaking at the World Economic Forum in Davos, Switzerland, promised to take action to “bring down the cost of oil.”
Oil Prices and Treasury Yields
Trump’s comments had an immediate effect on the oil market, with West Texas Intermediate crude oil falling over 1 percent to $74.62 per barrel on Thursday. The bond market also saw some movement, with the two-year Treasury yield, sensitive to changes in interest rate expectations, nudging lower. Meanwhile, the 10-year Treasury yield, a critical market interest rate affecting corporate and consumer borrowing, inched higher but has been moving lower over the past week.
“Yields have been moving lower after that inflation data,” said Lauren Goodwin, an economist at New York Life Investments. “That’s foundational to equity market moves we have had this week.”
Tariff and Deportation Delays
Investor sentiment has also been positively impacted by the Trump administration’s cautious approach toward tariffs and mass deportation programs. President had proposed a 25 percent tariff on imports from Canada and Mexico and a 10 percent tariff on imports from China, but the measures are not expected to take effect until February, easing some of the market’s previous anxieties. Before taking office, Trump had even considered imposing tariffs of up to 60 percent on Chinese imports.
“Worst fears have not been realized and that has helped the market move higher,” noted David Kelly, chief global strategist at J.P. Morgan Asset Management.
Corporate Earnings and Market Optimism
Rising stock valuations have also been supported by a series of positive corporate earnings reports. Notably, Netflix surged nearly 10 percent on Wednesday after reporting record subscriber growth for the final quarter of 2024. General Electric also saw a 6.5 percent increase on Thursday following stronger-than-expected profit results.
According to data from FactSet, earnings for S&P 500 companies are on track to grow by more than 12 percent in the fourth quarter compared to the same period in 2023, marking the best quarter for corporate profits since the end of 2021.
Investor Caution Amid Record Highs
Despite the positive performance, some caution persists. Inflows into funds that invest in U.S. stocks have slowed, and a Deutsche Bank measure of investor ownership of stocks has fallen to its lowest level in two months.
S&P 500 rose by more than 20 percent in both 2023 and 2024, prompting concerns that the rally may have gone too far, especially given the dominance of large technology companies that now drive much of the market’s growth. Many investors are increasingly dependent on the performance of the tech giants.
Jamie Dimon, CEO of JPMorgan Chase, remarked during an interview with CNBC that asset prices had become elevated, stating, “You need fairly good outcomes to justify those prices.”
Impact of President Trump’s Administration
new administration’s policy announcements and Twitter updates have contributed to a volatile market environment. As the market reacts to signals from President Trump, particularly those on social media platforms like Truth Social, investors are adjusting to the risk of sudden changes that could affect market outcomes.
“What changes in our day-to-day is risk or reality that the market is reacting to something on Truth Social,” said Goodwin. “It’s not a good thing or a bad thing, it’s a new thing.”