The S&P 500 Cracks 5,000

On February 9th, 2024, the S&P 500 cracked 5,000 for the first time. Said another way, the value of the 500 largest companies in the U.S. has reached a new all-time high and a special number in our minds: 500 companies at a value of 5,000.

Why is this important?

The Value Of Time

I like thirty-year periods. Most folks seem to start saving in earnest for retirement at around age 30. You can access your retirement funds penalty-free at age 60 (age 59 1/2, but that’s tedious to say). The average two-person couple that retires at 60 will have at least one of them live till age 90. Crisp thirty-year periods to save for retirement and to live in retirement.

Tracking the S&P 500 over time is where we get the value. Let’s take a look at some numbers.

The S&P 500 Value Over Time

Do you want to guess what the value of the S&P 500 was thirty years ago, on February 9th, 1994? Go ahead. Guess. Pick a number and hold it in your mind. I’ll wait.

On February 9th, 1994, the S&P 500 opened at 471.

The value of the S&P 500 is up more than 10X in thirty years.

But wait, there’s more!

The S&P 500 Dividends Over Time

When you are a co-owner of the best businesses in the world, you get the profits of those companies in the form of dividends.

The S&P 500 paid a dividend of 70.3 in 2023. In isolation, this number is arbitrary. What about in 1994? The dividend was 13.3.

The profits paid by the 500 largest companies in the U.S. to their owners grew 5.3x.

Put them together, and what have you got?

The S&P 500 Total Return Over Time

The S&P values grew 10x over the last thirty years. Their dividends grew 5.3x. If you reinvested those profits over that time, you wouldn’t be up 15.3x; you’d be up 17x.

In thirty years, you would have 17x’d your money.

What about the main alternative: bonds?

The US Bond Market Over Time

Over the last 30 years, the US Bond Market is up 3.4x.

Yup. 3.4x… vs. 17x.

$10,000 invested in the US Bonds for 30 years: $34,600

$10,000 invested in the US Equities for 30 years: $172,600

Inflation Over Time

How does all of this compare to inflation? Inflation has averaged 2.5% per year over that time. The cost of everything you need and want to buy has doubled since 1993. Let’s lay that out:

Cost of Living: Up 2x.

Bonds: Up 3.4x

Equities: Up 17x.

If we adjust the chart above for inflation, we get:

Which is Safer?

Here’s a question for you. Which is the safer investment in your earning years? Which is the safer investment in your retired years? Hint: The answer is the same.

S&P 500 Cracks 10,000

We can celebrate the S&P 500 hitting 5,000. It’s a great milestone. But here is a stock market prediction I’m going to make:

At some point in the future, you will see the headline “The S&P 500 Cracks 10,000!”

It will happen. It’s only a matter of time. If the value of the S&P can be up 10x in thirty years, it will go up 2x again. This is the only question you need to ask yourself now:

The Crucial Question

“Will I be in the S&P 500 when it hits 10,000?”

This is the crucial question. Millions of people have chosen to be in bonds, cash, fixed annuities, whole life insurance, CDs, and many other “safe” investments over the last 10, 20, and thirty years. They have not 17x’d their money. Will you make that same mistake?

How long will it take to hit 10,000? No one knows. But how long will it take your 5% CDs, bonds, annuities, and other insurance products to double? 14 years. If the S&P 500 can 17x in 30 years, I think it can double long before 14.

A Wild Ride

Investing in equities is a wild ride. Being co-owners of the best businesses in the world has ups and downs. It’s not easy. But that’s what we are here for.

My primary role is not to pick the best-performing stock, fund, or index over the next thirty years. No one can do that. It’s not to predict when the market will go up or down. No one can do that, either. My job is to ensure then when not if the S&P 500 hits 10,000, you own it. It’s going to be fun when it happens.

Stay the course.

This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are those of the people expressing them. Any performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be directly invested in.