Stock investors had to go on a harrowing round trip over the last seven months, but the market may be in a healthier place after it.

The S&P 500 index of big U.S. stocks is back to a record high, closing above 2,930 on Tuesday for the first time since Sept. 20. On the way, though, it took investors on a terrifying plunge of nearly 20%, amid worries that the economy would tip into recession. After hitting bottom in December, stocks took off on a nearly mirror-image rally .

Even though the S&P 500 is back at the same level, analysts say many of the market’s vital signs look different today than in late September.

Worries about a possible recession have dimmed, in large part because of a change in stance by the Federal Reserve. That has many investors predicting more gains for the market this go-around, despite risks still hanging over stocks, such as the still simmering global trade war and slower growth for economies and corporate profits around the world.

Here’s a look at some of the changes for the market, and one big similarity, between then and now:

AN EASIER FEDERAL RESERVE

This is the biggest difference by far, investors say.

Last autumn, the Federal Reserve was deep into its plan to gradually raise interest rates, after having kept them pinned at nearly zero for years. Higher rates would slow the economy, but it would also reduce the risk of higher inflation and the job market was in much better shape than in the aftermath of the Great Recession. When the S&P 500 set its record on Sept. 20, the Fed was a week away from raising its key short-term rate by a quarter of a percentage point for the seventh time in eight quarters.

But those and other moves by the Fed raised worries along Wall Street that the central bank was moving too fast and could push the economy into recession.

“I was feeling very cautious on the market last fall because you were seeing a lot of straws in the wind that the Fed was too tight,” said Margie Patel, senior portfolio manager at Wells Fargo Asset Management. “Even though rates were low, you could see housing and autos looking weak, and in the stock market, every now and then, you’d see a sector of the stock market plunge for really no reason.”

In December, the Fed raised rates again and said another two increases may come in 2019. But officials changed their outlook early this year, following the plunge in stock prices, and officials pledged to be patient in raising rates. Then, in March, the central bank said it may not raise rates at all in 2019.

The easier tone sent the yield on the 10-year Treasury’s yield, which affects rates for mortgages and other loans, down to 2.57% from 3.07% in late September. That’s a boost for the economy, as well as for stock prices.

“Recession, I think it’s off the radar now,” Patel said.

BOTTOMING GROWTH EXPECTATIONS

Companies are in the middle of telling investors how much profit they made during the first three months of 2019, and analysts have prepped for disappointment. Wall Street is forecasting a drop of more than 3% for S&P 500 companies, the first decline in nearly three years.

That’s a concern for investors because stock prices tend to track profits over the long term. But analysts expect growth to return and accelerate as the year progresses. After hitting bottom in the first quarter, analysts expect S&P 500 profit growth to ramp back up to 8.5% in the fourth quarter thanks to stronger than expected revenues.

Economic data has been improving around the world, which is raising optimism.

When the S&P 500 set its record last fall, dueling import taxes by the United States and China threatened global growth, higher mortgage rates were hurting home sales and the initial October jobs report hinted at slower hiring.

Now, U.S.-China trade tensions have dialed down, even if underlying conflicts are unresolved. Mortgage rates have fallen, home sales have recovered somewhat and the labor market has been solid, on average.

The economy still appears on course for slower economic growth this year than the roughly 3% pace achieved in 2018, with economists outside of the Trump administration generally pegging the annual gain at closer to 2%. But investors see a much lower risk of recession in 2019.

A LESS EXPENSIVE MARKET, THOUGH STILL NOT CHEAP

Stock prices may be back to where they were in September, but they don’t look quite as expensive by some measures of value.

One of the main ways that analysts measure the value of a stock is to measure its price against the company’s earnings. In September, the S&P 500 was trading at 20.6 times its earnings per share over the prior 12 months. That was well above its average of 16.3 over the prior 15 years.

Today, the S&P 500 is still trading above its long-term average, but not by as much: It’s closer to 18.7.

STILL HESITANT INVESTORS

When interest rates are low for a long time, the concern is that it will inflate a bubble. Two decades ago, investors piled into dot-com stocks and pushed them to prices that markets now see as ludicrous. In the middle of the last decade, it was housing prices that soared too high, too fast.

So far, at least, investors are still hesitant to pile into stocks. This is actually a reason the market may be primed for more gains, some analysts say.

Investors have pulled more money out of U.S. stock funds in the last few months than they’ve put in, according to the Investment Company Institute. If those skeptical investors come back to stocks, it could provide a further lift.

Of course, many risks still remain for markets, and few analysts are predicting the S&P 500 to continue rising in a straight line, as it has for much of 2019. Negotiations on the U.S.-China trade war are still ongoing. Low interest rates have encouraged U.S. companies to gorge themselves on debt, and some ideas percolating in Washington, such as universal health care, could drag down corporate profits.

Still, many investors are feeling better about the market’s health this go-around, most of all because the easier Fed has helped diminish threat of recession.

“This 2,900 is better than the 2,900 we had a few months ago,” said Steve Chiavarone, equity strategist at Federated investors.
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