The S&P 500 has erased all of the losses since the Fed started raising rates over a year ago

• The S&P 500 closed at 4,372.59 on Wednesday after the Fed held off on raising rates.
• It's erased all of the losses and then some since the Fed's first rate hike in March, 2022.

After 15 months of pain from the Federal Reserve's rate hikes, which sent stocks into a brutal bear market, the S&P 500 is hovering just above where it was when the central bank started tightening monetary policy in March, 2022.

On Wednesday, the S&P 500 dipped after the Fed made the decision not to raise interest rates while keeping a hawkish stance, but climbed soon after to close at 4,372.59. On March 16, 2022 — the day the Fed raised rates for the first time in the current cycle — the benchmark index closed at 4,357.86.

Last spring, high inflation and the prospect of climbing borrowing costs led to a sell-off, a bear market, and a proliferation of recession forecasts.

So what's powering the benchmark index higher, even as inflation is looking sticky and recession predictions are still rolling in?

First, look to corporate earnings, which historically are the number one driver of stock market gains. Simply put, earnings have held up, with corporations defying dreary forecasts and many buoyed by an astoundingly resilient US consumer.

Analysts had largely downgraded their estimates heading into the first-quarter earnings season, but those calls were mostly bucked by strong results. By the end of May, nearly 80% of companies that had reported first-quarter earnings beat estimates, according to FactSet, and the reporting season was marked by the strongest performance relative to analyst expectations in two years.

To be sure, second quarter estimates say earnings will decline 6.4% for the S&P 500, according to FactSet. If that pans out, it would mark the index's largest decline since the second quarter of 2020, when earnings dropped by 31.6%.

A second tailwind for stocks right now is the hype around artificial intelligence. OpenAI's ChatGPT took over the internet in the closing months of 2022, and since then, Big Tech has ridden the wave of excitement, with investors rewarding the companies with the biggest plans for the nascent technology.

Stocks like Nvidia and Meta have soared on their AI ambitions, gaining 194% and 132% this year, respectively. Nvidia in particular has been a standout, but the AI craze has powered the whole tech sector so far this year.

With tech companies promising new developments and inflation still easing at a steady clip, the Fed's easing up on its aggressive rate hike campaign would be another boon for stocks this year. Historically, a pause in rate increases precedes double-digit returns in the stock market, according to Bloomberg data.

The S&P 500 has gained about 14.7% in 2023, and just over 18% in the last 12 months.