What’s Driving the S&P 500 to Record Highs?
The S&P 500 has been setting new records this week. Whenever that happens, the natural question is: what’s driving it and what should we do about it? Here’s the way I see it from an advisor’s perspective.
Earnings are holding up
Company profits are not falling apart. In fact, analysts have been raising estimates for the third quarter. Growth is coming in stronger than expected in many sectors, which gives the market a foundation to move higher.
The Fed has shifted
The Federal Reserve cut rates in September and signaled it may have more flexibility going forward. Lower expected borrowing costs increase the present value of future earnings, and that makes equities more attractive, especially in growth-oriented areas of the market.
AI is still in the spotlight
Artificial intelligence remains a huge theme. Chipmakers and large technology companies continue to attract capital whenever there is new news about data centers or partnerships. Because the S&P 500 is weighted by company size, the movement of a few very large firms has a big influence on the overall index.
Buybacks add support
Companies are still spending heavily on stock buybacks. After a record first quarter and a quieter second quarter, total buybacks over the past year are close to one trillion dollars. This reduces the number of shares outstanding and supports earnings per share.
More than just tech
Health care has played a role in the latest move higher, giving the rally some breadth beyond technology. Seeing more than one sector participate often makes gains feel more sustainable.
What this means for investors
New highs do not remove risk. Economic data could be delayed during the government shutdown. Earnings season always carries surprises. Global events can create volatility. But the combination of steady profits, rate relief, strong themes like AI, and corporate buybacks helps explain why the index is where it is today.
For clients, my advice is the same as it is when markets are quiet. Check that your allocation still matches your goals and your time horizon. Rebalance if equities have run past your target. Be mindful of taxes when realizing gains or losses. And don’t let idle cash sit unplanned when it could be put to work more productively.
Records are part of investing. They’re not a signal to panic or to chase, but they are a good reminder to stay disciplined and keep your plan front and center.
If you want a second opinion on your portfolio or a strategy that does not depend on the next headline, you can schedule a short call at goldenacrewealth.com
Disclosures
This article is for educational purposes only and is not individualized investment, tax, or legal advice. Golden Acre Wealth Management is an Arizona-registered investment adviser. Services are offered only where properly licensed or exempt. Please see our Form ADV for more details.