After three shakier months, the S&P 500 finally closed at another new all-time high on October 28. That marks the 14th record high in a year that's so far delivered returns of 21% — more than double the benchmark's long-term historical average.
This latest achievement comes amid the busy, multiweek period known as earnings season, when publicly traded companies report results for the most recent quarter. Optimism among traders on Wall Street that the U.S. and China are close to finalizing parts of a phase one trade deal helped push the benchmark over the final hurdle.
This high also follows a bumpy ride in the stock market over the summer. After its July record, the S&P 500 fell more than 6% in less than three weeks as uncertainty about the U.S.-China trade deal and recession fears rattled traders.
Here's what three professional investors make of the market's new achievement — and what it means for you:
While there have been a number of small records in recent years, the following chart of the S&P 500 shows five distinct peaks: January 2018, September 2018, April 2019, July 2019, and now in October 2019.
Prior records were followed by declines, and the S&P 500 has yet to breach those levels "with any kind of energy," says Tom Martin, senior portfolio manager at Globalt Investments. That reflects lingering uncertainty in the market about a possible U.S.-China trade deal and global economic growth, he adds.
Compared with that high in January 2018, for example, the S&P 500 is only up about 7%. "What you're seeing is a manifestation of the uncertainty that is so dramatic in the market," Martin says. Until that lifts, the market may not rally much further, or could fall as it has done following past record highs.
"Although these records seem like they're milestones — and they are — it's just another number in the grand scheme of things," Martin says.
Video by Courtney Stith
New highs can often cause one of two different reactions among investors, according to Eric Freedman, chief investment officer at U.S. Bank Private Wealth Management.
At one extreme, people wonder if it's the right time to invest because the market may appear to be at "a really, really inflated level," Freedman says, while at the other extreme, people believe a new high confirms that the economic prospects for companies are good and there's momentum to drive stock prices even higher.
"The truth probably lies somewhere in between," Freedman says.
There's still uncertainty in the market, including the ongoing trade negotiations between the U.S. and China, the Federal Reserve's next steps, and the pace of global economic growth, he adds, which is why attention quickly shifts from the new high to the question of, "Where do things go from here?"
While a new high for the S&P 500 is notable, it's not the only such record. Market benchmarks for stocks around the world — including those for Europe, France, Germany, Japan, and Brazil — have also set new one-year highs in recent days. And about 8% of the individual stocks in the S&P 500 — including Apple and J.P. Morgan — reached either all-time records or 52-week highs on Monday, according to data from FactSet.
Combined, these achievements show that traders believe the global economy is stronger than they'd previously thought, says Willie Delwiche, investment strategist at Baird. This type of underlying strength suggests the market's rally could persist.
"New highs aren't to be feared," Delwiche says. "If you see more new highs at an individual stock level, that's good for the S&P 500."
Your portfolio's returns may vary depending on your investments, but the stock market's achievements this year serve as a reminder of the benefits of investing for the future.
Still, while the market's returns in any given year can seem significant at the time, they aren't, necessarily, when you consider your money might well be invested for decades. In the past 20 years, for example, the S&P 500 has seen annual returns ranging from up nearly 30% to down more than 38%.
As experts say, don't let short-term market movements affect your long-term plans.
Instead, focus on building a diversified portfolio — with a mix of assets like stock, bonds, index funds, and exchange-traded funds (ETFs), and with investments from around the world — and continue investing for the future. That way, you'll have time to ride out any periods when the market gets bumpy — and benefit from the market's proven, long-term track record.
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