S&P…5000! What's next? What will the week bring?

Last week, the S&P 500 index exceeded the key level of 5000 points, thus establishing a new historical peak on the chart. From the beginning of 2023 to February 8, 2024, the American index of five hundred companies increased by as much as 30%. Only 10 companies were responsible for more than ⅔ of this growth. What's next with the valuation? S & P 500?

The Fed is not feeling the pressure

The probability of the Fed cutting interest rates in March has decreased to just 20%, although the May meeting date already carries a 50% chance of such a move on the part of the Reserve. The Fed continues to point to three interest rate cuts this year, but at its last meeting it was clearly emphasized that this is unlikely to happen in March. The American central bank is closely monitoring the macroeconomic data coming from the economy, and these are not bad. The significant jump in the ISM indices and the likely further decline in inflation confirm that the Fed's actions so far have had the expected effect.

There is also plenty of optimism on Wall Street - last week the S&P 500 index exceeded the key level of 5000 points, thus establishing a new historical peak on the chart. It took investors 6,5 years to double the value of the index, and in the last several months alone the S&P 500 has gained 30%. However, it should be borne in mind that most of this movement is caused by a relatively narrow group of champions, including shares of General Electric, Caterpillar and Fedex.

At the same time, there are many indications of a significant overvaluation of the index - the forecast P/E is already 2,7 standard deviations from the average, and the ratio of buyers to sellers - although still positive - is starting to decline. Much will depend on the quarterly reports coming in, and the most important of them - NVIDIA's - will be published on February 21.

In today's webinar:

• Powell rules out March
• What's next for USD?
• S&P 500 at historic highs… and what next?

About the host

Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.

CFDs are complex instruments and involve a high risk of a quick loss of cash due to leverage. 76% of retail investor accounts record monetary losses as a result of trading CFDs with this CFD provider. Consider whether you understand how CFDs work and whether you can afford the high risk of losing your money.