The Significance of New Market Highs: Insights from Invesco’s Global Strategist
On the back of upbeat economic data, Wall Street optimism for Fed rate cuts, and surging consumer sentiment, stocks have cemented new records in January.
New Highs: A Common Occurrence
Despite the hype surrounding new market highs, they don’t signal any immediate danger. Brian Levitt, Invesco’s global market strategist, argues that these highs are not a cause for concern. In fact, they’re a rather common occurrence. Levitt points out that since the S&P 500’s last peak in January 2022, the macroeconomic landscape has changed significantly, but the US economy has managed to avoid recession and consumer sentiment has remained optimistic.
Stocks and Future Outlook
Levitt explains that stock market averages do not revert to the mean. Instead, they offer insights into what lies ahead for the US and the world. If conditions continue to improve for most people, and businesses thrive, investors should expect upward trends in the market over the long term.
Analyzing Stock Valuations
While certain stocks in the S&P 500 may be trading at extended valuations, Levitt highlights that the majority of the index is trading at average valuations. New highs in the market provide little information in and of themselves. Instead, it is more insightful to compare the price of an index to the fundamental characteristics of the companies within it, such as earnings, sales, and book value.
Historical Perspective: Records and Trends
The stock market frequently achieves new records, with the S&P 500 hitting 1,176 new highs since its inception in 1957. This equates to approximately one new record every two weeks. Levitt emphasizes that investors should expect the market to ascend to many new highs over their lifetimes, even if the path is not always linear.
In conclusion, new market highs should not be viewed as a cause for alarm. As Invesco’s global market strategist suggests, they are a normal and expected part of the stock market landscape. Investors should focus on the bigger picture, taking into account future outlooks, valuations, and historical trends when analyzing market performance.
Analyst comment
Neutral news.
As an analyst, the market is expected to continue ascending with many new highs over time, despite occasional fluctuations. Investors should focus on the bigger picture, future outlooks, valuations, and historical trends to analyze market performance.
