Sunday, February 4, 2024

The S&P500: How High Can It Go?

One of the most common soundbites that I hear while listening in to the financial news channels over the years is this:

“The S&P 500 is at an all-time high today.”


And by looking at the charts, it is true; it is climbing, and its rise further accelerated since emerging from the ashes of the Global Financial Crisis of 2008/2009.


The obvious question now is: how high can it go? I believe this question has been asked many times before.


My answer to this is just four words: I do not know. As with all investment charts, high can go higher.


Digging in further, we know that the S&P500 is being hard carried by the Magnificent Seven counters of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. The potential and advent of artificial intelligence, as well as favourable earnings reports for some of them, spell further upside for the index.


But there are some talk that S&P500 is overvalued to some degrees, depending on the time frame used; using 5-, 10- and 20-year periods, the average price-to-earnings ratios for the index was 25.49, 23.83 and 24.7 respectively, lower than the current 27.131.


I had mentioned that the S&P500 is a good entry for newbies who are venturing into the United States (U.S.) market, being an index and representing the microcosm of the U.S. economy in general. However, if you are still worried on whether to go in given this perceived high, then you may want to go on a dollar-cost averaging (DCA, available for unit trusts and regular savings plan) and/or go in at a set number of shares per regular period (e.g., 100 shares of S&P500 ETF every quarter). This way you would not be worried about whether you went in on a low or a high, because the entry prices would be smoothed out, or averaged, over time.




The Bedokian is vested in the S&P500.




1 – PE Ratio (TTM) for the S&P500. Gurufocus. 2 Feb 2024. (accessed 4 Feb 2024)

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