The S&P 500’s recent all-time high stands not as a lone feat, but as the latest chapter in a two-year saga of record-breaking climbs. In January 2022, the S&P reached 4,818. A number of factors fueled this ascent: positive economic data, robust corporate earnings, low interest rates, and the promise of pandemic recovery.
Yet, anxieties regarding inflation, potential Fed intervention, and geopolitical tensions were present.
Fast forward to January 2024, and the market has scaled even higher.
The gains have extended into February as the S&P 500 crossed 5,000 for the first time ever. Continued strong earnings, subdued inflation, dovish Fed signals, and a robust labor market have propelled this new climb. However, potential economic slowdown, record-high margin debt, and continued geopolitical tensions exist and create some doubt among investors.
Historically, each instance of the S&P breaking a previous all-time high has resulted in a new all-time high sometime in the future. In fact, as shown in the chart below, since the inception of the S&P 500 Index in 1957, there have been 1,176 new highs! While this will almost certainly be the case for the newest market peak, the interval of time between the events is uncertain.
Will the market continue its upward trajectory in 2024 and beyond?
Could we see a market recession and not see another all-time high until much later in the decade?
Or will we have a similar approach to the last set of all-time highs that ranged two years?
Comparing the peaks of 2022 and 2024 reveals some small differences. The January 2024 S&P 500 P/E ratio, at 23.3, suggests a similar market compared to 2022's 23.1. However, increased volume, from 241 million shares in January 2022 to 317 million shares in January 2024, points to heightened investor engagement. Meanwhile the VIX Index, a calculation used to measure the US market volatility, is lower, hovering around 14 compared to 23 in January 2022.
While market highs within two years may seem unprecedented, historical data offers some perspective, as shown in the chart above. Analyzing periods following previous all-time highs reveals a diverse picture. The post-financial crisis climb of 2009, took 5.5 years to reach new heights, demonstrating a slow and steady ascent. Other all-time highs, such as what we have experienced so far in 2024, shows that a new high can be reached within days. The time frame between record highs, therefore, remains unpredictable, and is influenced by various economic, political, and psychological factors.
By embracing a well-defined strategy and financial plan, investors can equip themselves to conquer whatever Wall Street throws their way, regardless of the pace of future market ebbs and flows. Ultimately, while the frequency of market highs is uncertain, partnering with an advisor who prioritizes financial planning can be crucial to an investor’s success. Maintaining and executing a strategy when market conditions scream “buy” or “sell” can be the difference in an investor’s assets benefitting from the next market high.
Being prepared, receiving sound financial advice, and executing a plan in times of market volatility can lead to a winning strategy over time.
Sources
- Historical S&P high chart: Invesco “Compelling Wealth Management Conversations”
- Metrics and prices: Yahoo Finance Historical Prices
- VIX data: CBOE.com
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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