S&P 500 is a leading benchmark for US equities and is closely tracked by investors globally. After a big stock market collapse in 2022, the S&P 500 seems to have covered a lot of ground in 2023. The S&P 500 YTD performance is close to 7.25% and some of the top US stocks of the index have rallied more than 50% till date in 2023.

Highest gainers of S&P 500 includes Tesla, Align Technology, Catalent, Warner Bros. Discovery, Meta Platforms, NVIDIA Corporation, Royal Caribbean Cruises that have delivered between 50% and 64 percent YTD returns. Tesla, Meta Platforms and NVIDIA Corporation are the ones that had shed huge values in 2022 and have risen from the lows this year. All these three stocks are part of Nasdaq 100, the tech heavy index.

Going forward, the strong jobs data may keep US Fed hawkish as Powell has already indicated of more rate hikes leading to a higher terminal rate above the market expectations. This may keep the rally at bay and the volatility may remain high in line with new incoming macro data. US CPI for January is scheduled to be released on February 14 and markets are expecting some pressure on prices.

Also Read: Fed Chair Powell’s message from Tuesday’s interview encourages markets to soar

The talk of higher terminal rate with Fed’s benchmark hitting 6% is already doing the rounds. Such aggressive stance, in the opinion of some market watchers, makes it difficult for stocks to advance steadily, particularly following the run that sent the S&P 500 into overbought territory.

Also Read: US CPI calculation to change for January inflation data

Another factor that may bring the bears back to action are the falling earnings and the dim outlook of the economy. Despite declining earnings and economic prospects, stock values have increased since the start of the years. However, as is commonly said, the markets are always forward-looking and are at least 6-9 months ahead from the current economic environment. For long term investors, this could be the time to build a diversified portfolio with stocks available at beaten-down valuations.