Image Source: Pexels

The stock market continues to set records in 2024 on the strength of the U.S. economy. The bull market that started in October 2023 has continued in 2024. Next, the S&P 500 Index closed above 5,000 for the first time ever this past Friday. Further, the Nasdaq Composite continues to rise on the strength of the mega-cap tech stocks. Also, the Dow 30 is near its all-time high. However, small-cap stocks are underperforming.

Many people, expecting a stock market crash and recession, are likely looking at the numbers in disbelief. Even hedge fund billionaires were incorrect. But so far, the U.S. Federal Reserve has threaded the needle with inflation, removing a significant challenge for the American economy and stock market.

The latest Consumer Price Index (CPI) revision showed core inflation was an annualized 3.3% rate in the last quarter. The good news about inflation probably created optimism for investors.

Moreover, even the struggles at the New York Community Bank (NYCB) did not slow the market except for regional banks. In fact, arguably, the dividend announcement by Meta Platforms (META) overshadowed NYCB’s dividend cut.

In any case, the philosophy that applies in sports holds in investing; one should reinforce success. I am staying the course, and I believe the stock market will do the same.

If a company like Meta Platforms, the parent of Facebook, starts paying a dividend, they are likely back in vogue. For many years, tech companies have emphasized stock repurchases over dividends. Is that changing?

Stock Market Overview

Recent data from Stock Rover revealed that stock markets had another good week. The Russell 2000, the Dow Jones Industrial Average (DJIA), the Nasdaq Composite, and the S&P 500 Index were positive. Mega-cap tech stocks and some cyclical sectors continued to perform well.

6 of the 11 sectors gained this week. The Technology, Consumer Cyclical, and Healthcare sectors were the top performers of the week. However, the Communication Services, Consumer Defensive, and Utility sectors were the worst performers.

Oil prices gained nearly 6% to ~$76.60. The VIX declined ~6.6% to 12.93, which is still well below its long-term average. Gold ended the week at ~$2,039 per ounce.

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Image Source: Stock Rover

As previously mentioned, the markets continued to move upward due to the economy’s strength. The Nasdaq led the way, followed by the S&P 500 and the DJIA. However, the Russell 2000 was still negative due to weakness in small-cap equities, but it appeared close to breaking even.

Meanwhile, 7 of the 11 sectors have seen positive returns for the year overall. The top performers in 2024 have been Communication Services, Technology, and Healthcare, while the Basic Materials, Real Estate, and Utilities sectors have been trailing thus far.

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Image Source: Stock Rover

The dividend growth investing strategy we utilize started the year down. Larger market capitalization stocks have been performing better than smaller ones. The table below shows their performance by category. However, dividends and passive income streams continued to grow.

Image Source: Stock Rover

Stock Market Valuation This Week

The S&P 500 Index has recently traded at a price-to-earnings ratio of 27.28X, while the Schiller P/E Ratio is about 33.83X. These multiples are based on trailing twelve months (TTM) earnings. The long-term means of these two ratios are approximately 16X and 17X, respectively.

Overall, the market is still overvalued despite the recent correction, the bear market, and the recent rebound seen in the markets. Earnings multiples of more than 30X are overvalued based on historical data.

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