The S&P 500 index hit an all-time record high on Friday, closing above 4,500 for the first time ever. This marks a major milestone as the stock market continues its historic bull run after facing inflation and recession worries over the past two years.
Lead Up To The Record
The stock market has been on a wild ride over the past few years. After hitting an all-time high in early 2022 above 4,800, the S&P 500 plunged into a bear market as inflation surged to 40-year highs and recession fears mounted.
However, the market bottomed in October 2022 and has been steadily climbing back since then. Signs that inflation has peaked along with a slowdown in Federal Reserve interest rates hikes have boosted investor optimism.
The S&P 500 entered 2024 less than 1% below its previous high. Strong earnings from major companies along with renewed enthusiasm about AI and semiconductors powered tech stocks higher in January, lifting the broader market.
Breaking The 2022 Record
On Friday, the S&P 500 finally broke through resistance around 4,500 that had capped previous rally attempts. The index closed at a record 4,512, surpassing its previous all-time closing high of 4,496 from early 2022.
All 11 S&P 500 sectors finished higher on the day, showing the broad strength of the rally. Technology and consumer discretionary stocks led the way higher.
Mega-cap tech giants like Apple, Microsoft, Amazon and Google parent Alphabet – which have heavy weightings in the index – all hit new highs. Chipmakers Nvidia and Advanced Micro Devices also soared over 10% each.
The market was lifted higher amid optimism that the Fed is nearly done raising rates and inflation continuing to cool from 40-year highs, boosting hopes that the worst is over for the economy.
“This historic milestone is a huge vote of confidence that the stock market expects clear skies and smooth sailing ahead after the brutal inflation storm and recession fears,” said Liz Smith, chief investment strategist at View Capital Advisors.
What Comes Next
While the S&P 500 is partying like its 2022, many strategists say the ride higher still faces challenges.
“The stock market is forward looking, but dangers remain on the horizon,” said Michael Wilson, chief U.S. equity strategist at Goldman Sachs.
He cautions that inflation is still well above the Fed’s 2% target and corporate earnings face tough year-over-year comparisons after benefiting from pandemic demand and stimulus programs last year.
However, most experts think the new highs are justified given the brighter economic outlook.
“Consumers and businesses are in excellent financial shape with low debt levels and solid job growth continuing. That will power more stock market gains over the rest of 2024,” Smith said.
Here is a table summarizing the closing milestones for the S&P 500:
|Gain From Previous Record
|Jan 19, 2024
|New all-time record close
|Jan 3, 2022
|Previous all-time record close
|March 5, 2009
|Bear market bottom during Great Financial Crisis
|Oct 9, 2007
|Previous all-time record close before GFC
The table shows how long it took for the index to regain its previous all-time high after the financial crisis bear market over a decade ago. By contrast, it took less than two years to reach new highs after the short 2020 pandemic bear market.
S&P 500 Poised To Extend Record Run
While risks remain, strategists are optimistic the S&P 500 still has room to run this year given the expected profit growth and low recession odds.
“Profit margins are near all-time highs and expected to rise further, making stocks look attractively valued for long-term investors compared to bonds,” said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities.
Most Wall Street forecasters see mid-single digit percentage gains this year, with some of the more bullish calls in the 10-15% range. That would translate into another 8-10% upside from current levels for the index.
Another tailwind is share buybacks, which are expected to hit record levels above $1 trillion in 2024 following last year’s market swoon. That extra demand often provides support, analysts say.
However, after the nearly uninterrupted rally since October, some expect a near-term pullback is likely at these altitudes before the next leg higher.
“I wouldn’t be surprised if stocks consolidate for a few weeks to digest these big gains before renewed buying interest sparks fresh highs later this quarter,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
Still, CEO confidence remains resilient and consumers continue spending at a healthy clip, suggesting business and profit cycles can endure.
As long as the Fed pulls off an elusive “soft landing” for the economy as it works to snuff out lingering inflation pressures, market historians may look back at 2024 as another banner year for Wall Street.
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