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CNN
—
On Friday, the S&P 500 achieved a significant milestone by closing above the 5,000 level for the first time, as positive sentiment pervades Wall Street and investors respond well to new data indicating progress in inflation.
This achievement occurs amidst a period of robust economic expansion, the advancement of artificial intelligence, a better-than-expected earnings season, and anticipation of a shift from the Federal Reserve to initiate rate cuts.
On Thursday, the S&P 500 briefly surpassed the 5,000 threshold for the first time during trading hours.
The journey to this milestone took nearly 41 years for the S&P 500 to reach its initial major milestone of 1,000, which was reached on February 2, 1998, as stated by Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
The prior major milestone of 4,000 was accomplished on April 1, 2021, following significant rate cuts by the Fed, extensive government stimulus injections into the economy, and optimism related to post-pandemic economic growth due to the Covid-19 vaccine.
On January 19, the benchmark index achieved a new record for the first time in two years, closing at a figure that surpassed its previous high of 4,796.56 reached on January 3, 2022. This led to the index setting six new highs in January alone.
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According to Sam Stovall at CFRA Research, when the S&P 500 establishes a new high in January, it reaches new highs in February around 75% of the time. Furthermore, when new highs are set in both months, he noted that the index generated an average return of approximately 16% and ended the year higher around 88% of the time.
The S&P 500 has seen a 5.4% increase so far this year. In 2023, the index experienced a 24% surge, with stocks rallying substantially towards the end of the year as optimism grew regarding the Fed’s ability to achieve a soft landing, containing inflation without triggering an economic downturn.
The ascent to these new heights has been primarily driven by a limited number of stocks, commonly referred to as the “Magnificent Seven” – Nvidia, Microsoft, Meta Platforms, Amazon, Apple, Alphabet, and Tesla.
Last month, shares of Nvidia, Microsoft, Meta Platforms, and Alphabet closed at record levels multiple times.
Scott Wren from Wells Fargo Investment Institute noted in a message on Wednesday, “Ideally, when the stock market ramps up, many sectors and stocks should be participating.”
According to Silverblatt, the returns on the Magnificent Seven stocks accounted for approximately 62% of the benchmark index’s 26% total return last year.
