Where will the stock market be in the 2nd half of 2024?

The stock market defied expectations with a strong performance in the first half of 2024. But that success raises a key question for investors: Is there room for stocks to go higher?

SThe &P 500 is up nearly 15% in the first six months of the year. The Dow Jones Industrial Average rose about 4% during that period, while the tech-heavy Nasdaq rose about 18%.

Analysts who spoke to ABC News attributed strong benefits to enthusiasm about artificial intelligence as well as resilient economic growth and expectations that interest rates will ease.

However, experts predict, the stock market will likely struggle to sustain breakneck growth for the rest of the year as investors shrug off rising prices and weather uncertainty to focus on economic prospects and the November election.

“It’s been a really good start to the year,” Adam Turnquist, technical strategist at LPL Financial, told ABC news. “But when we look at the second half, in the short term, we think the market is overbought.”

Despite straining under the weight of the highest interest rates in twenty years, the US economy has sustained solid growth. Meanwhile, U.S. employment results held steady, beating expectations and adding significant wages.

However, progress in the fight against inflation has largely stalled. Even so, the Fed has indicated that additional rate hikes are unlikely, instead predicting a rate cut by the end of 2024.

“The market has welcomed the fact that we are likely to see rate cuts,” said Turnquist.

These broader economic trends coincide with investor appetite for tech companies leading the adoption of AI. Major stock indices are attracting investors who are optimistic about the potential benefits of products like ChatGPT.

The profits are concentrated mainly in a few tech giants, known as the magnificent seven: Alphabet, Amazon, Apple, Meta, Microsoft, Tesla and Nvidia. Even within these groups, the benefits accrue mainly to a select few.

The share price of Nvidia — the maker of many of the computer chips that drive AI advances — has risen nearly 150% since the start of 2024. Microsoft, which has a major stake in OpenAI maker ChatGPT, has seen its stock rise by more than 20% this year.

“The effect of AI has helped market sentiment and deservedly so,” Mike Loukas, CEO of TrueMark Investments, told ABC News. “But some concentrated stocks seem to carry the market at any time.”

In light of the gangbusters performance at the beginning of this year, experts warned that the stock market will likely struggle to sustain returns. At the basic level, the rise in stock prices that stretches back to last year will eventually reach a point where traders become reluctant to pour in funds on the elevated price tag, analysts said.

“There should be a reset button from this overbought situation,” said Turnquist.

Even more, the positive trend in the economy faces several threats. Above all, the combination of high interest rates and persistent inflation can weigh on corporate profits and wear on investors’ patience.

“The whole dance — rate cut or no rate cut; inflation or no inflation — I think continues,” Loukas said. “We are still quite sensitive overall to macroeconomic factors.”

That economic uncertainty is compounded by the various possible outcomes in the November election, Loukas added.

“The election is going to be a wild variable,” Loukas said. “There’s a lot of uncertainty about what’s going to happen and the market is still trying to price that.”

Loukas predicted growth in the stock market for the remainder of 2024, but said the pace would be less than the surge experienced in the first half.

Turnquist, of LPL Financial, echoed that sentiment. The stock market may rise slightly by the end of the year, he said, but companies will face a more challenging environment.

“There is still a risk that the fight is not over with the Fed,” he said.

Still, Turquist noted, the outlook for the market beyond this year remains good. “We are still in a long-term uptrend,” he said.