S&P 500 Reaches 6,000 Level in Post-Election Rally

The S&P 500 index reached a historic milestone today, briefly touching the 6,000 level for the first time. This rise was fueled by investor optimism following President Donald Trump's re-election. This significant event is seen as a continuation of the strong rally that has occurred since the election results were announced on November 6. All three major indices hit record levels, as the market anticipates corporate earnings driven by Trump’s agenda of tax cuts and deregulation.

S&P 500 futures had previously crossed the 6,000 threshold on Thursday, indicating strong market sentiment. Throughout 2024, the index has shown a remarkable increase of over 25% since the end of the last bear market in October 2022. In the latest check, the S&P 500 was trading at 5,998.50, up 0.43%.

This year's significant gains are largely attributed to a sharp rise in mega-growth stocks that are sensitive to interest rates. These stocks have been supported by expectations of lower borrowing costs and hopes for a soft landing for the U.S. economy. One contributing factor to this optimistic outlook was the Federal Reserve’s decision to cut interest rates for the first time in four years in September, followed by another 25 basis point reduction in November. According to CME FedWatch, market participants expect another rate cut before the year ends.

The sector leading the index's rise has been information technology, driven by industry giants like Nvidia (NASDAQ: NVDA). The rapid growth of the index is highlighted by the fact that it took just about nine months to add 1,000 points after reaching the 5,000 milestone at the beginning of February. This sharply contrasts with the nearly three-year span it took to rise from 4,000 to 5,000 in April 2021.

Despite the recent rally, current stock valuations are quite elevated. The S&P 500 is currently trading at 22.3 times forward earnings, the highest level in the past two years and significantly above the long-term average of 16. While most major brokerages forecast that the index will close below the 6,000 level by year-end, Evercore ISI holds a more optimistic view, predicting that the index could close at or around this historic level.