S&P 500 Reaches Record High

Last Friday the S&P 500¹, consisting of 503 stocks and arguably the most popular measure of the performance of U.S. stocks, hit an all-time record high closing at 4,839.81 topping its previous record high set more than two years ago on January 3, 2022. And, yes, the above is not a typo as there are strangely 503 stocks in the S&P 500 today. Anyway, in other words, the S&P 500¹ has produced no gain over the last two years. Somewhat long stretches of time between new highs like this happen when stocks experience a bear market like they did in 2022.

Not ALL S&P 500 Stocks are at Record Highs…Some are Very Far from It!

Source: www.YCharts.com as of 1/19/2024

Although the S&P 500¹ INDEX is at an all-time high, not all 503 individual stocks that make up the index are at record highs. As a matter of fact, of the 503 stocks in the index, 86 of them are down -50% or more from their record highs (above pie chart – green slice)! Another 147 (the grey slice) are down -25% to -50%. Less than 30% of the stocks in the index are at or within 10% of their record high (blue pie chart slice). Click here to view a table of every stock and its current price versus its all-time high.

Time to Buy or Time to Sell?

When the S&P 500¹ Index hits a record high, is it time to buy or the time to sell? Nobody knows for sure! As most investors know, stocks have gone higher over time, not lower, and generally assume they will continue to go higher. Not only do they go higher but the S&P 500¹ Index is often at a record high. Since 1950, the S&P 500¹ Index has hit a new record high nearly 1 in every 13 days! Of course, it can go long stretches of time between new highs when there is a significant bear market but that is far more rare than common.

The S&P 500¹ Index has made a new high nearly 1 of every 13 days since 1950!

Last Friday when the S&P 500¹ hit its record high, it had been 512 trading days since the last record high… quite a gap in time as previously noted. Since 1950, there have been only 5 other periods when the number of days between new highs was 500 or more as illustrated in the below table. Using this data as a barometer you can argue this is a time to buy as the S&P 500 Index has been higher 4 out of 5 times 1 year after hitting its new high. Although those odds are very good, it is not all that much different than buying on any other day with 73.8% odds that the index will be higher a year later!

Source: www.YCharts.com

Other Market Indexes

The Dow Jones Industrial Average², another popular index for U.S. stocks but only consisting of 30 stocks, hit a new all-time high just over a week ago on January 11^th. The S&P 500¹ and the Dow Jones² generally move in the same direction given that they both track large U.S. stocks. Therefore, both hitting new highs around the same time is certainly no surprise.

Source: www.YCharts.com. See footnote Disclosures 3-6 for additional information.

Coming as a bit of a surprise to some investors though is that the Nasdaq Composite³, an index that is generally considered to be a barometer of technology stocks, remains -4.6% below its record high. This index had a strong 2023 gaining +43.4% but that followed a loss of -33.1% in 2022. As the above graph shows, the Russell 2000⁴, a measure of small U.S. stocks, is still off -20.7% from its high along with international stocks^5,6 all off double-digits as well.

Large U.S. Stocks Have Been the Place to Be

There’s no questioning the fact that large U.S. stocks have been among the best performers the past several years. The S&P 500¹ Index and the Dow Jones Industrial Average², both measures of large U.S. stock performance, are at new highs while other indexes are not. That is the reality today but it’s important to remember that’s not the way it has always been. There have been many extended periods of time when both small stocks and international stocks have outperformed large stocks by a very wide margin.

Stay Diversified

In summary, as always, my recommendation is to stay diversified! I know of no better approach. The S&P¹ and Dow² are hitting new highs although many individual stocks are nowhere close and most other market indexes are not as well. For some investors this can lead to the temptation to chase what’s hot which often ends in disappointment. Again, stay diversified as research and history show this will make you the long-term winner.

Disclosures

¹S&P 500 (Index) is the price of the index not including dividends. Source: www.YCharts.com.

²Dow Jones (Industrial Average) is the price of the index not including dividends. Source: www.YCharts.com.

³Nasdaq Composite is the price of the index not including dividends. Source: www.YCharts.com.

⁴Russell 2000 is represented by ETF symbol IWM. Source: www.YCharts.com.

⁵International Developed is represented by ETF symbol VEA. Source: www.YCharts.com.

⁶International Emerging is represented by ETF symbol VWO. Source: www.YCharts.com.

⁷503 stocks in S&P 500 as of 1/19/2024. Source: www.YCharts.com.