What Now? Analysts React To S&P 500 Record Highs

The S&P 500 index marked a major milestone this week, closing at its first record high since the coronavirus outbreak began wreaking havoc on the U.S. economy back in February.

Monday’s closing price of 3,389.78 market uncharted territory for the S&P 500, but many investors are uncomfortable with where the market goes from here given the underlying economy is still in tough shape and the outbreak is far from over.

Hangover Ahead? Jim Cramer said investors should anticipate a stock market “hangover” following this week’s slate of impressive retail sector earnings reports.

“We’re in that hangover moment where I literally think...there’s programmed selling. Guys who are saying listen, when the S&P gets to an all-time high, get me out. And I’m seeing that across the board and I think it’s going to create opportunities, but we have to be sure that stocks are down enough before we pull the trigger,” Cramer said.

Brian Price, Head of Investment Management for Commonwealth Financial Network, said the path of least resistance for the stock market appears to be upward for now.

“There are plenty of risk factors that investors will continue to monitor, such as a resurgence in coronavirus cases, failure to pass another relief bill, and the upcoming elections. Investors are encouraged that we’re back near all-time highs in the market, but they’ll need to stay vigilant for what lies ahead over the coming months,” Price said.

Unbelievable Recovery: Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, said record highs for the S&P 500 in August would have been an unbelievable concept back in March.

“There are numerous headwinds still confronting the market: historically high unemployment, an historic drop in GDP, the potential for a second wave of Covid-19 infections in the fall, political risk, to name just a few, but what is rarely talked about are all of the factors which could drive the market higher, such as: another government stimulus package, trillions of dollars in infrastructure spending in 2021 and beyond, low interest rates for an extended period of time and continued Federal Reserve quantitative easing,” Zaccarelli said.

Ryan Detrick, Chief Investment Strategist for LPL Financial, said the stock market’s strong performance since the March lows isn’t as puzzling as it may seem at first glance.

“Many continue to wonder why stocks are at new highs with 10% unemployment and nearly a million people filing for initial unemployment claims. The truth is economic data is backward looking and stocks are looking ahead to a much brighter future,” Detrick said.

Benzinga’s Take: The Federal Reserve stepped in and provided trillions of dollars of stimulus for the economy this year, propping up the stock market to an unprecedented level. For now, that approach has worked wonders for SPDR S&P 500 ETF Trust SPY investors, but it may take years before Americans will know the ultimate economic impact of the Fed’s actions.

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