Investors are betting the S&P 500 reaching 4,000 is just the beginning
The S&P 500 closed over 4,000 on Thursday for the first time, having nearly doubled its coronavirus pandemic low of 2,192 in just over a year.
Why it matters: "Round numbers can be big psychological barriers for markets, so breaking 4,000 could provide a confidence boost to stocks in the short term," Lule Demmissie, president of Ally Invest, says in a note.
- "And we think the market has room to run longer-term, too. We’re seeing signs of confidence in the options market as the S&P 500 approaches new highs," she adds.
- "It’s an exciting milestone for U.S. stocks, which are back at record highs thanks to a third round of fiscal stimulus, COVID vaccinations, and Federal Reserve support."
Between the lines: The Cboe's volatility index (VIX) has declined significantly, "dancing below 20" and even hitting a 52-week low below 18 — a level it hasn’t consistently closed below since the March downturn, Demmissie notes.
- It took the index over 16 years to double from the 1,000 point mark, which it first hit in February 1998.
Watch this space: Tech stocks continued to mount a comeback after struggling in the first quarter. The Nasdaq jumped thanks to a big run-up in chip stocks, with the PHLX Semiconductor Index rising 3.7%.
The big picture: Asset managers and economists continue to be bullish on the stock market and the economy, as money further piles into equities.
- Data from the Investment Company Institute show equity funds have seen net inflows for the past four weeks in a row and in six of the past seven weeks, including the two highest weeks of inflows to stock funds on record.