S&P 500 Needs a Big Boy

Good day, Good Day!

Let’s have some fun and learn about the S&P 500 and how Stonks are STONKING today.

This is not investment advice and is intended for entertainment purposes only

So the S&P 500 Hit an All-Time High… Now What?

After a rollercoaster of emotions over 700 days long, the Standard and Poor’s 500 (S&P 500) has a record-breaking green day on 01/19/24.

WOW!

Like this is really cool.

Real Quick:

For those who may not know, here is the Investopedia article breaking down the basics.

It’s a market-cap-weighted index of the 500 (but actually 503) industry-leading public companies.

It was aprox. 746 days since the last all-time high.

That’s 24 months.

Some of those months were a painful bear market. Other’s were running red-hot.

There have only been 13 times since 1957 that the S&P has gone over a year without hitting an all-time high.

So what’s next???

If I knew the perfect answer to this question then I wouldn’t be sitting on a cheap/broken desk chair in my tiny room planning my next trip to Applebees for all-you-can-eat wings at half price.

But we can look back historically and see the direction the market went after a similar sequence of market events. But always remember that past results do not indicate future performance.

So what can we expect when the S&P 500 goes > 1 year without hitting an all-time high and then, BOOM (!), it hits one?

Historically, there is a bull market 1 year later, 92% of the time (per Compound Show).

2007 is one of the outliers here which is pretty on-brand for the nature of the housing market crash.

We also have to account for what the makeup of the index is and think about the companies that are benefitting here. Unsurprisingly, it’s big tech.

(Queue I Need A Big Boy by SZA on SNL)

Many of the heavy hitters here are known as FAANG stocks, which is an acronym for the following companies:

• Meta (formerly known as Facebook)

• Amazon

• Apple

• Netflix

• Google

  So these and other similar large/mega cap companies are pulling the index up HARD.

Other smaller cap companies are not fairing as well.

A 5% interest rate environment has a very different effect on smaller companies than Big Tech. Big Tech can operate business as usual even in hawkish interest rate environments. (Except for some pretty major layoffs.)

Smaller companies have higher roll risk when it comes to debt and are more reliant than mega-caps when it comes to loan needs.

Since Friday the S&P has continued to climb.

So we’ll see what the next few months hold for the 503 stocks that make up the good ol’ S&P 500.

_Source:

_{Batnick, Michael & Brown, Josh. “Apple’s Vision Pro Sells Out, Netflix Grabs WWE Raw, Welcome to New All Time Highs.” The Compound and Friends. 01/23/24.}

Meme of the Week

Credit to @buccocapital