S&P Reaches Record High of 5,000

Markets have had a strong start to the year and are already setting new records. On February 9th, 2024, the S&P 500 marked a new record high crossing 5,000 for the first time. The widely followed S&P 500 is the benchmark index that tracks 500 of the largest U.S. publicly traded companies.  

Looking back at prior milestones, the S&P 500 index first crossed the 100 mark in 1968 and didn’t cross 1,000 until 1998, nearly 30 years later. To compare, it took about three years to go from 4,000 to 5,000. Part of the difference in time was due to simple math; to go from 100 to 1,000, the market needed to return 900%, versus going from 4,000 to 5,000, where the market needed to return 25%. The point here is not to diminish the impressive 5,000 milestone but to put it into context as we go forward. The higher it goes, the lower the required return to reach the next milestone.  

The new S&P 5,000 milestone is an indicator of sustained investor confidence in the strength of the economy driven by a strong consumer, continued earnings growth, and cooling inflation. Even though we saw a significant increase in interest rates, which typically leads to higher borrowing costs, companies were surprisingly able to grow their revenues and control expenses. Many of these factors significantly helped advance the index to 5,000. 

The latest economic readings point to inflation nearing the Federal Reserve target of 2%, unemployment remaining below historic averages, and relatively strong economic growth. The Fed’s dual mandate of stable pricing and maximum employment are within reach, but only time will tell if they can be achieved successfully. The below chart shows that when new milestones are achieved, many times the next move can be higher.