S&P500 Reached All-Time High: What Can We Learn?

S&P500 Reached All-Time High

After a bumpy ride in early 2024, the S&P500 index finally made a new all-time high, breaching the level we last saw at the peak of the 2021-2022 bull market. With the market officially in a bull market, what’s next?


What Happened?

In 2022, we entered a bear market, with the S&P500 index declining by more than 20%. The Fed’s aggressive rate hikes to combat inflation triggered the bear market. Fast forward to 2023, we saw inflation moderated, with the latest reading already in the low 3% range, down from the peak of 9%. Core CPI also moderated to below 4%, down from 6.6% at the peak.

Because of the cooling inflation, the Fed no longer projected any more rate hikes and instead expected to cut interest rates in 2024. The market was delighted with this Fed pivot and started to rally.

Additionally, the latest US economy data also showed that the jobs data was still resilient and the US economy was stronger than expected, thus lowering the probability of a recession that usually accompanies a high-interest rate environment.

The market continued to rally throughout 2023 in a V-shaped recovery and finally, in Jan 2024, broke the all-time high level last seen in Jan 2022.


What Can We Learn?

The relatively fast market recovery is somewhat unexpected because the interest rates are still high, and there are no rate cuts yet. The economic condition is still restrictive. Many still expect the US economy to enter a recession any time soon. Moreover, we are also experiencing two different wars raging at the moment. All signs still point to a bleak condition, yet the stock market just printed a new high. How can it be?

The Market Is Forward-Looking

The market is forward-looking, so it is trying to price in what will likely happen in the future. With the Fed expected to pivot this year, the market has started to price in this significant milestone. A lower interest rate usually correlates to a more accommodative economic condition, allowing businesses to grow easier. As such, this causes risk-on assets such as the stock market to appreciate.

Stay Invested

It is hard to time the market. Despite all the signs pointing to a not-so-good economy, the market has already reached a new all-time high. We may have missed the rally if we tried to exit the market and buy back when the economy was better. The easiest way to ensure we enjoy the market recovery is to stay invested throughout.


What Would We Do?

Although we have entered an official bull market, we should be aware that the market does not go up in a straight line. There are waves up and waves down. Let’s look at the current market movement so far.

S&P500 all-time high weekly chart - feb 2024

The above chart is the S&P500 weekly chart over the past five years. In the past several months, we can see that the market has been up in an almost straight line. This is the wave up. We don’t know how much higher this wave-up can go, but eventually, there will be a healthy correction before another leg-up.

We would be interested in adding more shares when this pullback happens. Although we have been DCA-ing consistently, we usually deploy more capital to amplify our return when there is a pullback within a bull market.

What about if there is a recession? This is an example where we, as investors, have no control. Therefore, we must remain prepared. The market may correct depending on how deep the recession is, and we believe this is yet another opportunity to add more shares.

In the long run, we believe the stock market will allow us to beat inflation and grow our wealth.

If you want to invest in US equities, you need to use an investment broker with access to the US market. You can follow our summary of some of the best online brokerage accounts in Singapore.

Happy investing 🙂

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Disclaimer: The information provided here is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice or recommendation of any sort.

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David Ang

About David Ang

A long-term investor with a portfolio across the United States and Asian equities, REITs, commodities, and fixed incomes. After over a decade of hands-on investing (and making countless mistakes), I'm excited to use this platform to share what I've learned over the years. And let's continue to learn together. Writing about macro economy, equities, personal finance, web3. Follow me on Twitter: @danggaku