S&P 500 Set to Hit 5000 Milestone, but History Warns of a Looming Correction
In September 2021, I discussed how the market had set its sights on the S&P 500 index hitting 5000. To wit.
“Yes, the rally off the COVID-19 bottom in March 2020 has been extraordinary, but we think there are further gains ahead.
Solid economic and corporate profit growth, in conjunction with a still-accommodative Fed, means that the environment for stocks remains favorable.
As a result of our higher EPS estimates, we raise our targets for the S&P 500 for December 2021 by 100 points to 4,600 and June 2022 by 150 points to 4,800.
We initiate our December 2022 target of 5,000, representing about 13% price appreciation from current levels.’” – David Lefkowitz, UBS.
Of course, the market peaked in January 2022, just four months later, at 4796.56. Fast forward 2-full years of returning investors to breakeven, and the market is again approaching that magical round number of 5000.
Nonetheless, with the market surging higher since the beginning of the year, bullish investors are drooling over the next significant milestone for the market – 5000.
These milestones have a gravitational pull as investors become fixated on them. Interestingly, the time to reach these milestones continues to shrink, particularly after the Federal Reserve became hyperactive with monetary policy changes.
These milestones have very little meaning other than being psychological markers or having the ability to put on an “S&P 5000” hat if you’re in the media.
Nonetheless, the bullish backdrop suggests the market will likely hit that psychological level soon, if not already.
But the question we should be asking ourselves is what most likely will happen next.
Just a few months ago, in October, with the market down 10% from its peak, investors were very
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