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S&P 500 and Dow Jones thriving as indexes reach record highs; What’s next?

S&P 500 and Dow Jones thriving as indexes reach record highs; What's next?
Vinicius Barbosa

Leading finance indicators continue to reach record highs, suggesting a heated economy despite the macroeconomic challenges.

In particular, the S&P 500 and the Dow Jones Industrial Average reached new all-time highs on February 23. The former reached a record $5,111.06 on the SP index and closed the week at $5,088.79. Meanwhile, Dow Jones made a new high at $39,284.87 and closed the week at $39,104.12.

Interestingly, both indexes are trading with a strong momentum in the monthly Relative Strength Index (RSI). Usually, this suggests a continuation of the uptrend.

S&P 500 and Dow Jones Industrial Average; monthly charts. Source: TradingView (Finbold)

The macroeconomics of leading indexes at record highs

Nevertheless, macroeconomics is at challenging times from different perspectives, creating a fundamental divergence among financial indicators. On that note, Jamie Dimon, CEO of JPMorgan Chase & Co (NYSE: JPM), warned we live in the “most dangerous times.”

For example, dozens of countries worldwide have seen record inflation in the past few years, driving interest rates to local highs. Moreover, war escalation and political disputes worsen the situation and redirect the capital flow to the conflicts. 

However, the artificial intelligence (AI) surge earned the attention of investors, fueling technology stocks like NVIDIA Corp (NASDAQ: NVDA). In this context, the Nasdaq Composite reached record highs earlier this month.

Some experts believe this is not a sustainable move, considering the macroeconomics. This is similar to MFHoz, who suggested an artificial pump to attract retail capital.

Currently, the finance market awaits further developments on the Federal Reserve’s target interest rate decision on March 20. The market consensus is betting that the Federal Reserve will keep the target interest rate as is, with a likely cut in the next meeting.

High rates have historically ignited economic recessions. Usually, it is first observed in the labor market and risk assets such as stocks and cryptocurrencies. Therefore, this could affect these leading indicators at current record highs, causing a retracement.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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