S&P 500 hit a record high. What it means for the economy, your 401(k)

Jhon

6 months ago

The S&P 500 index closed last week at a recordgood news for Americans' retirement accounts.

The benchmark index closed up 1.2% on Friday to surpass its previous record from January 2022. The Dow Jones Industrial Average, which surpassed its 2022 peak last month – also closed at a new record on Friday, with the Nasdaq Composite rising 1.7%.

The milestones come after major stock market declines in 2022, Wall Street's worst year since the Great Recession. At the time, investors were worried about high inflation, high interest rates and a possible recession, and the S&P 500 fell about 20%.

"It took more than two years, but the S&P 500 finally hit new all-time highs again," he said. Ryan Detrick, chief market strategist at financial services firm Carson Group. "This is a great reminder to investors that although we have seen a lot of jitters and concerns over the past two years, investors are often rewarded over time."

Why are stock markets going up?

Technology stocks helped propel the S&P 500 to new heights on Friday, with chipmaker Nvidia rising 4.2%, Texas Instruments gaining 4% and semiconductor giant Broadcom rising 5.9%.

Sam Stovall, chief investment strategist at investment research and analysis firm CFRA Research, noted that technology companies have done a good job of managing expectations in recent quarters. Now, he said, investors may be thinking that Wall Street is "underestimating the kind of growth we're likely to see" from semiconductor and other technology stocks.

S&P 500 record high:Wall Street hits all-time high after two-year round trip marked by inflation

What is the Dow Jones record?

The Dow Jones Industrial Average closed on Friday with a new record: 37,863.8.

What is the all-time high of the S&P 500?

The S&P 500, widely used as a benchmark for large stocks and index funds, closed at 4,839.81 on Friday.

What does this mean for me and my 401(k)?

The S&P 500 hitting record highs is a boost to investors' retirement plans. It is also a sign of investor confidence in the future of the economy.

Detrick highlighted signs such as strong consumer spending, a healthy labor market, slowing inflation and a Federal Reserve that is expected to start reducing interest rates this year.

Stovall added that investors wouldn't buy if they felt the economy was heading into a recession. (Forecasters say there are 42% recession this year, according to a recent survey by Wolters Kluwer Blue Chip Economic Indicators. This is lower than previous forecasts, but still a historically high risk.)