- a stone functioning as a milepost
- a significant event or stage in the life, progress, development, or the like of a person, nation, etc. The S&P 500 closed above 4,000 on Thursday, April 1, marking a major post-recession milestone.
Perhaps you’ve heard by now that the S&P 500 recently topped 4,000 for the first time ever.1 It took sixty-four years to get there – the index as we know it today began on March 4, 1957 – and we’ve had to weather market bubbles, bear markets, and recessions to see it. Frankly, it’s astonishing that it happened this soon. After all, it was just over a year ago that the markets crashed due to the onset of the pandemic.
But what is the significance of 4,000? To be honest, not much. The number is mainly psychological. It’s large, it’s round, it stands alone. But the market isn’t really any different at 4,000 than at, say, 3,827. That’s why the number is less important than the way we respond to it.
You see, the markets are driven by many things, but foremost is confidence. The funny thing about confidence is that the more you have, the more you’re likely to gain. Confidence begets confidence, just as fear breeds fear. We see evidence of that every time the market surges, or every time it drops. So, if the S&P reached 4,000 because of increasing investor confidence, it’s very possible it’ll rise higher – at least in the short term – because those same investors will see the number and think, “Things are great! We made it!”
The question we need to ask ourselves, «Salutation», is “Made it where?” Look at the definition at the top of the page again. If we consider 4,000 as a milestone, then we must remember that this is just a stage. A marker. 4,000 is not a destination. It’s just one more step on a long road to your financial goals.
What we must consider is the ground on which our road is laid. Is it sturdy or shaky? After all, there are certainly things to feel wary about. New variants of the coronavirus, rising inflation – the list goes on. But there’s lots of good news, too. Hitting 4,000 may be just a milestone, but it’s a promising one. It’s an event in a series of events that suggests we’re heading in the right direction. If this were just a unique, out-of-the-blue number, we’d all dismiss it out of hand. But it’s a part of the steady improvement we’ve been seeing since last spring. Unemployment is lower.2 Federal stimulus is driving more economic activity. Over 55 million Americans have been fully vaccinated. President Biden’s goal of distributing 100 million vaccines in his first 100 days in office was accomplished 42 days early.3 (Biden has now set a goal of distributing 200 million by the end of April.3) Combine all those factors, and you can see why consumer confidence levels are at their highest since the pandemic started.4 So, there are reasons for optimism.
But the most important thing to remember is the opportunity this news presents. The opportunity to demonstrate sound principles. While some people might see 4,000 and throw caution to the winds, we’re going to emphasize the basics of successful investing. We’ll keep following our long-term strategy, making decisions based on what’s right for you instead of chasing rabbits or overreacting to headlines. Continued progress toward your dreams is always our goal. Rational thinking is always our guide. Not the ups and downs of the market.
So, as you listen to the pundits on TV, or read their commentary in the newspaper, remember: 4,000 is a milestone. No more, no less. Like all milestones, it shows how far we’ve come…but it’s up to us to remember the road that still lies ahead.
If you have any questions about the markets, or if you just want to chat, please feel free to give my office a call at 808-537-2912. I always love to hear from you!
1 Julia Horowitz, “The S&P 500 shoots above 4,000 points for the first time ever,” CNN Business, April 1, 2021. https://www.cnn.com/2021/04/01/investing/sp-500-4000-points/index.html
2 Jeff Cox, “Weekly jobless claims tumble to lowest level in more than a year,” CNBC, March 25, 2021. https://www.cnbc.com/2021/03/25/weekly-jobless-claims.html
3 “Tracking the Coronavirus,” NPR, updated April 1, 2021. https://www.npr.org/sections/health-shots/2021/01/28/960901166/how-is-the-covid-19-vaccination-campaign-going-in-your-state
4 Xavier Fontdegloria, “U.S. Consumer Confidence Hits Highest Point Since Pandemic Started,” The Wall Street Journal, March 30, 2021. https://www.wsj.com/articles/u-s-consumer-confidence-hits-highest-point-since-pandemic-started-11617118100
This material was prepared by Bill Good Marketing.