The stock market has soared this year, but will it last? Experts weigh in

As long-standing recession alarms continue to blare from some forecasters, investors don’t appear to hear them.

The S&P 500 -- the index that most people's 401(k)s track -- has climbed more than 18% since the start of this year, while the tech-heavy Nasdaq has jumped a staggering 35%. The Dow Jones Industrial Average, which has jumped some 6% this year, notched its eighth consecutive day of gains on Wednesday, the longest such streak since 2019.

The blockbuster stock market performance this year owes much to a significant cooldown of inflation that has bolstered expectations that the Federal Reserve can bring price hikes to normal levels without causing a severe downturn, analysts told ABC News.

Those analysts also noted that enthusiasm about artificial intelligence has provided a boost for major tech stocks that are disproportionately reflected in the gains of major indices weighted toward the biggest firms.

Analysts differed, however, in their opinions regarding whether the strong performance will last. Some said that in the coming months, investors will sour on the sky-high stock prices, while others said room for growth remains.

"It's pretty amazing that we're seeing such robust market returns this year, especially in the face of a looming recession," said Amanda Agati, chief investment officer at PNC Financial Services. "You have to claim victory and be thrilled."

The U.S. economy has proven more resilient than many expected amid an aggressive series of interest rate hikes at the Federal Reserve that are intended to fight price increases by slowing the economy and slashing demand, analysts said.

Consumer prices rose 3% in June compared to a year ago, marking a significant slowdown from a peak inflation rate last summer of more than 9%, data from the U.S. Bureau of Labor Statistics showed.

Some key economic indicators, meanwhile, have demonstrated robust performance. A jobs report earlier this month showed that the labor market slowed but still grew at a solid clip in June, adding 209,000 jobs.

The growing possibility of a ”soft landing” has cheered markets, John Stoltzfus, managing director and chief investment strategist at Oppenheimer Asset Management, told ABC News.

"What we think is happening here is primarily recognition by the market that indeed the Fed is having real progress against inflation," Stoltzfus said.

Meanwhile, an upswell of optimism about the benefits of AI has compounded that positive market outlook, Edward Moya, a senior market analyst at broker OANDA, told ABC News.

"It has been resilient because of the AI movement," Moya said. "There needed to be a fresh catalyst."

Major indices like the S&P 500 are weighted proportionately toward the largest firms, made up mostly of big tech companies, which have delivered better-than-average returns amid the ongoing AI fervor and consequently buoyed the performance of the overall indices, Moya added.

Shares of Google, which unveiled its generative AI product, Bard, in February, have climbed roughly 36% in value this year. Microsoft, which owns a major stake in ChatGPT-maker OpenAI, has seen its share price jump 46%.

"There's been a huge disconnect between the top 10 biggest names driving price returns and what everybody else is doing," Agati said, noting that performance of the S&P 500 this year, when excluding the ten largest companies, stands at single-digit gains.

Looking ahead, Agati and Moya said they expect the stock market to decline over the remainder of the year, ending 2023 with positive but modest returns. The full economic cooling-off effects of central bank rate hikes have yet to take hold, they said, adding that inflation may not return to normal levels as soon as investors hope.

"The rally will stall out here," Moya said.

Stoltzfus, however, said there's a "good chance" the stock market will end the year higher than it currently stands.

"We have maintained a fairly bullish posture," he said. "Where the market is trading right now would suggest to us that it has further to go this year."