The S&P 500 Hits a New Record: What Comes Next
The primary Wall Street index has returned to an all-time high following two months of stagnation. Most Israelis are exposed to this performance through pension and advanced study funds. We examine the catalysts for this surge, the distance to the next milestone, and why analysts remain cautious.
The S&P 500 index, considered the barometer of the entire US stock market, closed yesterday at an all-time high. The index jumped by 1.79% to reach 7,736 points, marking its first high in about two months and the end of a stagnation period during which it lost nearly 5% from its previous peak. Simultaneously, the Dow Jones index crossed the 54,000-point threshold for the first time in history, and the technology-heavy Nasdaq index added 2.59%.
A significant portion of Israeli pension savings, advanced study funds, and savings accounts is exposed to Wall Street stocks, and in recent years, many have chosen investment tracks that track the S&P 500. The logic is simple: when the index breaks records, the value of these savings increases.
What ignited the surge? Primarily a strong earnings season. Palantir shares jumped by about 29% after the company raised its annual revenue forecast, and heavy equipment giant Caterpillar rose 5.6% against the backdrop of growing demand for products from data centers being built for artificial intelligence. The Philadelphia Semiconductor Index, which suffered a dive of more than 20% in July, also recovered, climbing 6.6%.
Another key factor was oil. The price of a Brent barrel dropped by about 5.3% to $79.36, as market participants estimated that a settlement is approaching that would allow the reopening of the Strait of Hormuz and the renewal of oil flow. Lower energy prices calm inflation fears, and following them, US government bond yields also fell, a combination that usually benefits the stock market.
How far is the index from the 8,000 threshold? Closer than it seems. From the current level, an increase of only about 3.4%, or approximately 263 points, is required to touch the next round number.
However, this is exactly where one should be careful. Technical analysts are not rushing to declare a breakout. According to them, to establish a real trend change, the index needs to close above the support area around 7,620 points for several consecutive trading days. Without such confirmation, selling pressure could return.
There are also seasonal headwinds. The period between August and October is historically considered the weakest for the index, according to Bank of America. Furthermore, under the new Federal Reserve Chairman Kevin Warsh and against the backdrop of inflation that remains high, investors are not pricing in an interest rate cut at all, but are debating whether the rate will remain in place or even rise. The excessive concentration of the market around the topic of artificial intelligence also remains a risk in itself.
The bottom line: the momentum is positive, and the road to 8,000 is relatively short—about 3.5% growth—but it will not be smooth. If the breakout is confirmed and the rotation into growth stocks continues, market analysts estimate that the index may close the year higher than its current level.
Until then, those who save through the S&P 500 are enjoying the gains, but it is worth remembering that they come with volatility, and in a concentrated market, declines can also be sharp.
