The S&P 500 recently hit 5000. What does it mean and where are we headed?

Sean Sevey |

The S&P 500 took over headlines this month when it closed above 5,000 points for the first time. For many clients, these thresholds can cause anxiety for clients. In this article, we're looking back at how the S&P 500 got here, and what could happen next.

Chart of the S&P 500's rise from 0 to 5,000 points

From humble beginnings at just 16.66 points in January 1950, the widely followed benchmark index has traveled far in the almost 75 years since, generating incredible wealth along the way. 

We’ll explore the S&P 500’s journey to each 1,000-point milestone, lessons about volatility learned on the path to each level, and answer the question: How can advisors prepare their clients for ups and downs on the road to 6,000 and beyond?

Where is the Market Right Now?

The S&P 500 closed above 5,000 for the first time on February 9th, 2023, at 5,026.61. The index’s journey from 16.66 to 5,000 elapsed 74 years, 1 month, and 7 calendar days.

Each horizontal red line marks a 1,000-point increment, while vertical gray bars indicate a recession period. 

Chart of the S&P 500 showing 1,000-point increments

S&P 500 Level           Date First Reached (Market Close)                      Time to Reach Milestone

 

1,000                           2/2/1998                                                          48 years, 1 month, 0 days

 

2,000                           8/26/2014                                                        16 years, 6 months, 25 days

 

3,000                           7/12/2019                                                        4 years, 10 months, 17 days

 

4,000                           4/1/2021                                                          1 year, 8 months, 21 days

 

5,000                           2/9/2024                                                          2 years, 10 months, 9 days

 

Early Innings: The S&P’s Rise to 1,000

It took the S&P 500 index nearly half a century to reach 1,000 points. Starting at 16.66 on the first trading day of 1950, the S&P 500 closed above the 1,000-point milestone for the first time 48 years and 1 month later.

Chart of the S&P 500's rise from 0 to 1,000 points

Though the chart above might show a fairly smooth rise to 1,000, including accelerated growth starting in the 1980s, there were several major bumps along the way. In that 48-year journey, there were seven drawdowns of 20% or more, with the largest being 48.2% in October 1974. Eight recessions also took place.

Chart showing S&P 500 drawdowns between 0 and 1,000 points

What Happened After the S&P 500 Reached 1,000?

The S&P 500 went from 1,000 to 2,000 in 16 years, 6 months, and 25 days, closing at 2,000.02 on August 26th, 2014. The index achieved its second 1,000-point milestone in about ⅓ of the time as the first.

Chart of the S&P 500's rise from 1,000 to 2,000 points

 

The S&P 500 endured two of the largest recessions in history: the Dot-Com Bubble and the Great Financial Crisis. Both events also produced two of the largest drawdowns in history. On the journey to 2,000, it took the index two years to get halfway…but the rally stalled out, and the index bumped against 1,500 again in 2007.

Chart showing S&P 500 drawdowns between 1,000 and 2,000 points

 

What Happened After the S&P 500 Reached 2,000?

After closing above 2,000 for the first time, the S&P 500 advanced to 3,000 in 4 years, 10 months, and 17 days. It closed above 3,000 on July 12th, 2019. Similar to its journey from 1,000 to 2,000, the index rose from 2,000 to 3,000 in exponentially less time.

Chart of the S&P 500's rise from 2,000 to 3,000 points

 

There were neither any recessions nor any bear markets (generally defined as drawdowns of 20% or more) in this five-year span. The largest drawdown during this period was 19.8% in December of 2018, along with two other drawdowns of at least 10%.

Chart showing S&P 500 drawdowns between 2,000 and 3,000 points

What Happened After the S&P 500 Reached 3,000?

The S&P 500’s run from 3,000 to 4,000 took the shortest amount of time. The index climbed another 1,000 points in just 1 year, 8 months, and 21 days, reaching 4,000 on April 1st, 2021. Despite the event occurring on April Fools Day, such a fast 1,000-point advance was no joke.