How Does the Market Perform After Hitting a New High?

The large-cap benchmark S&P 500 index SPX finished at 4,839.81 on Friday, surpassing the prior record close of 4,796.56 set on Jan 3, 2022. This Monday, the index continued to climb, reaching an intraday high of 4,868.41 and closing at 4,850.43, once again hitting a new all-time high.

Over the past two years, the conflict between Russia and Ukraine, rampant inflation, and the highest borrowing costs since the turn of the millennium have been the primary causes of the U.S. equity market entering a bear market in June 2022.

Despite mounting concerns over inflation and rising interest rates, as well as an unexpected regional banking crisis and escalating geopolitical tensions worldwide, the U.S. economy has remained remarkably resilient in 2023.

The market rallied since last October, and with falling inflation rates and the Fed's pivot, many bet that the Fed would begin cutting interest rates. This anticipation drove up stock prices, as lower interest rates often lead investors to move their money from lower-risk assets like Treasury bonds to stocks.

The volatility experienced in the stock market at the beginning of this year has been attributed by analysts to an increase in Treasury yields and uncertainty regarding a potential interest rate cut by the Federal Reserve in March.

Steve Sosnick, chief strategist at Interactive Brokers, said, "It's normal for stocks to be stuck in a trading range when you’re trying to approach a record high, because you'd expect to have some resistance."

Tech stocks drove the stock market to new highs, with the S&P 500's information technology sector surging 2.4% on Friday. The benchmark index gained 24% in 2023, as investors became increasingly optimistic that the Fed could rein in inflation without causing a significant economic downturn.

"There's nothing bearish about new highs," Katie Stockton, the founder and managing partner at Fairlead Strategies, said "Meaning that when a major index like the S&P 500, like the Nasdaq 100, reaches a new all time high, what it does is, it clears the charts of resistance."

According to Oppenheimer's Ari Wald, the S&P 500 is predicted to reach 5,400 by the end of 2024, indicating a 12% increase from the recent closing value of 4,839.81. Wald is particularly bullish on mid-cap growth stocks.

Historically, the S&P 500 Index has a 68% probability of positive in the year following itsinitial annual record high since 1990. The following is a detailed historical data and statistics.