Stock surge could cushion broader downturn

If we’re still in a “vibecession,” someone forgot to tell the stock market — over there, things are better than ever.

What happened: The S&P500 cracked a new all-time high at the end of trading last week, closing at 4,839.81, just past the previous record set in January of 2022. 

  • A bucket of big tech stocks dubbed the “Magnificent Seven” — Apple, Alphabet, Amazon, Microsoft, Meta, Nvidia, and Tesla — accounted for around half of the S&P500’s growth last year.
  • Gains were driven by investor enthusiasm for AI, along with a growing belief that central banks will begin cutting interest rates as early as this spring. 

Why it matters: The stock market may not be the same thing as the economy, but high-flying stocks tend to strengthen the broader economy, too.

  • When the stock market is performing well, people tend to feel wealthier, which researchers have found causes them to spend more, driving up employment and wages.
  • Publicly traded companies also face less pressure to do big rounds of layoffs when stock prices are high and shareholders are happy.

Meanwhile, in Canada: The TSX has enjoyed more modest gains, as higher interest rates weigh down Canada’s more real-estate-dependent economy.

Yes, but: Plenty of risks remain that could spook investors and send markets reeling, from wars in the Middle East and Europe to unexpectedly stubborn inflation that forces central bankers to keep rates higher for longer.