The S&P 500 index achieved yet another milestone this year, closing above 5,000 for the first time on Friday.
Good news for Americans' 401(k)s., The announcement comes just three weeks after the index set a record closing price for the first time since January 2022, with heavy investment in stocks.
Tom Heinlin, national investment strategist at US Bank Wealth Management, called the record “an iconic milestone.”
“It's a big, round number,” he told USA TODAY. “This is an all-time high. But for the average person with a 401(k), I think it still suggests the economy is doing well.”
Why is the S&P 500 rising?
The S&P 500 closed 0.57% higher at 5,026.61 on Friday.
Market performance has been supported by signs that the Federal Reserve has ended its interest rate hikes and may cut them later this year. Excitement over advances in artificial intelligence also pushed up company stock prices.
“We've been through a pandemic… we're in two wars. Still, in the long run, there tends to be upward gravitational pull on stock prices,” said Global Head of investment management firm Invesco. said market strategist Christina Hooper, who also noted that rapidly rising interest rates have been a challenge for some time.
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Why should you care about the S&P 500?
So is this a big problem for Americans investing in 401(k) retirement plans?
Yes and no.
The S&P 500 is an index that includes 500 major publicly traded companies and is considered one of the best indicators of the health of Wall Street. When the benchmark index goes up, Americans' 401(k)s also tend to go up.
“It's a broad range of very important stocks,” said Stephen Satmeyer, chief equity technical strategist at Bank of America.
But while the 5,000 milestone grabs headlines, experts say that level may not be sustainable for long.
The first few months of an election year are “pretty volatile” for markets, Suttmayer said. It could take some time for the index to break above the 5,000 mark, as similar milestones have been followed by declines in the past.
“My guess is that we should be able to break 5,000 in a meaningful way. But I don't think we'll break 5,000 in a meaningful way within the next three or four months,” Suttmayer said, adding that Friday's milestone He added that he didn't think it was “that important.”
But Hooper said the milestone was a sign of market resilience, even if the index fell, noting that the S&P 500 index has already doubled since surpassing 2,500 in September 2017. .
“More than anything, I think this is a symbolic reminder to investors of the importance of staying invested,” she said.
Some strategists say this milestone could provide a psychological boost to the market.
S&P500's “Psychological Milestones”
Adam Turnquist, chief technical strategist at LPL Financial, said the S&P 500's performance across nine other major milestones was generally good, with an average 12-month return of 10.4%.
“Round numbers such as 5,000 often serve as psychological support or resistance levels for the market,” Turnquist said in an emailed commentary.
Ryan Detrick, chief market strategist at financial services firm Carson Group, echoed similar sentiments.
“On the surface, there's nothing special about 5,000 versus 4,999, but it's kind of a psychological milestone for investors,” he said.
Where did the Dow Jones Industrial Average finish?
On Friday, the Dow Jones Industrial Average closed 0.14% lower at $38,671.69.
What about NASDAQ?
The Nasdaq closed 1.25% higher at 15,990.66.
