Core Insights - The S&P 500 is expected to experience significant gains in the second year of the Federal Reserve's rate-cutting cycle, with historical data indicating an average return of over 16% [1][4] - The positive performance is contingent upon the U.S. economy avoiding a recession, as noted by LPL Financial's Chief Equity Strategist [2][6] - The first year of the current rate-cutting cycle has already seen the S&P 500 deliver a strong return of over 17%, surpassing the historical average of 9.6% for the first year [2][4] Historical Performance - Historical analysis over the past 50 years shows a consistent pattern of positive stock performance during rate-cutting cycles, with an average gain of 9.6% in year one and 16.4% in year two [4][6] - The median return for year two stands at 14.4%, indicating robust performance during this period [4] Economic Environment - For the S&P 500 to maintain its upward trajectory, sustained economic growth is essential, which could be supported by stable interest rates, cooling inflation, fiscal stimulus, and ongoing investment in artificial intelligence [7] - The macroeconomic environment is described as "far from assured," with potential headwinds including deficit spending, a stalled job market, legal challenges to tariffs, and geopolitical risks [9]