Stocks head toward something that hasn’t happened since the days of the dot-com bubble

The S&P 500 is flirting with what would be a rare accomplishment: rising 20% or more during two consecutive calendar years.

At least, that was the case as of Tuesday’s close, when the U.S. benchmark saw its year-to-date advance top 20% for the first time since the start of 2024, according to Dow Jones Market Data. The achievement happened to coincide with the index’s 41st record close of the year.

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By the time trading ended on Wednesday, the S&P 500 had pulled back a bit. But it remains close to its high, and in the wake of the Federal Reserve’s jumbo interest-rate cut, investors have good reason to expect that it will get there.

It’s been a while since the index has seen such strong years back to back. The last time it happened was 1998, according to Dow Jones Market Data. In those days, burgeoning public enthusiasm for stock trading and the hype unleashed by the advent of the commercial internet helped the S&P 500 SPX appreciate by 20% or more for four straight years beginning in 1995. The streak nearly continued for a fifth year, but the index rose by just 19.5% in 1999.

Prior to that, stocks hadn’t seen such strong gains for two years in a row since 1955, before the S&P 500 had even been introduced.

The strength of stocks’ advance has helped to revive speculation surrounding how much further large-cap U.S. stocks can climb, and whether the stunning bull-market run — which has seen the S&P 500 gain 60% since its October 2022 low, according to FactSet data — might be poised to slow, or even reverse.

Some have suggested abandoning large-cap stocks altogether in favor of better deals in the small- and medium-cap space, or even going bargain-hunting abroad.

But others insist that large-cap stocks are still investors’ best bet, even as their valuations have reached levels considered high relative to recent history.

Echoes of the dot-com days

The implicit comparison to the dot-com bubble days isn’t exactly a ringing endorsement. Wall Street professionals are quick to highlight the differences between now and then, as well as the similarities.