Wall Street Wednesday toasted another banner year, with US equity markets finishing near all-time highs following a steady stream of improving economic data and investor-friendly monetary policy.
In 2014, the broad-based S&P 500 gained 210.54 points (11.39 percent) to 2,058.90, easily outpacing forecasts that the index would gain only about six percent for the year.
The Dow Jones Industrial Average rose 1,246.41 (7.52 percent) to 17,823.07, while the tech-rich Nasdaq Composite Index climbed 559.46 (13.40 percent) to 4,736.05
All three indices dropped in the final session of the year in lightly traded volumes.
With the gains from 2014, the Dow has now risen six years in a row and the S&P 500 has lodged three successive years of double-digit gains, which is unusual, though not unprecedented. That has raised questions about whether the market can go much higher.
Lee Munson of investment firm Portfolio Wealth Advisors said the rally is "long in the tooth," but still expects it to continue due to the comparative strength of the US economy with the rest of the world.
"You have to put your emotions aside and look at the facts," Munson said. "The facts are we're still expanding."
Key worries for US investors in 2015 include weak growth in Europe and emerging economies, the hit from sharply lower oil prices to Russia and other petroleum exporters, and the blow from an eventual hike in US interest rates.
- Buying the dip -
While trending higher throughout the year, US stocks experienced intermittent fits of weakness in 2014.
These included a mid-winter swoon amid frigid weather that depressed economic activity; an April pullback on worries that technology stocks were a bubble about to burst; an October slump on global growth fears; and most recently a December retreat due to low oil prices and the plunging Russian ruble.
However, in each of these cases, investors stepped in to buy the dip, ultimately pushing markets higher.
The most recent rally was fueled by the Fed's December 17 pledge that it would be "patient" before raising interest rates, which was quickly followed by a government report showing third-quarter US economic growth came in at a staggering annual pace of five percent.
The back-to-back developments lifted the Dow above 18,000 for the first time and pushed the S&P 500 closer than ever to 2,100.
Standout sectors that rose more than 18 percent in the S&P 500 were health care, which was propelled by elevated spending under the new health care program dubbed Obamacare and a stream of mergers; technology, thanks to strong performances from companies like Facebook and Intel, which led the Dow; and utilities, which drew investors who sought dividend payouts at a time when interest rates remained low.
The weakest sector by far was energy, which fell about 10 percent, as oil prices dropped nearly 50 percent from last year.
Some analysts think retail-sector stocks could have more upside in 2015 as investors take advantage of low gasoline prices and increase their spending.
Consumer discretionary stocks in the S&P 500 underperformed the overall index in 2014.
"People are still concerned about what they're spending," said Howard Silverblatt, an analyst at S&P Dow Jones Indices.
- A dangerous rise? -
Despite the heady gains of the last couple of years, many analysts believe the US stock market still has significant running room in 2015.
Wells Fargo Advisors strategist Gary Thayer predicted more volatility, but noted that US stocks typically decline when the dollar is weak and inflation is high.
"These conditions do not exist today," Thayer said. "We continue to advise investors to be positive, not defensive, because we do not see the conditions that historically have been negative for stocks."
Munson of Portfolio also sees US stocks gaining, albeit at a more modest pace. He is eyeing the S&P 500 at 2,200, in part because he does not anticipate the Fed to significantly hike rates anytime soon.
Jack Ablin, chief investment officer at BMO Private Bank, agreed that US stocks could rise further in 2015 due to continued central bank easing, but cast such a rise in a cautious light.
Ablin warned that the combination of sharply lower oil prices, a higher dollar and weak overseas growth could plant the seeds for a big correction as was the case after similar conditions in the late 1990s sparked an eventual correction when the technology bubble burst.
"The market could continue to surprise to the upside, but at the same time get more and more dangerous from a valuation standpoint," he said.