S&P500 at record highs - time to stay in or pull out?

[Panamax]

S&P500

1 Jan 2000 = 1,450
24 April 2025 = 5,500 up by 280%

FTSE 100

1 Jan 2000 = 6,200
24 April 2025 = 8,400 up by 35%

These headlines may not be "income reinvested" but it's a huge mountain to climb.
https://www.ig.com/uk/news-and-trade-ideas/why-has...

[TownIdiot]

Out of interest, what does it look like without "the big 7"?

[Hustle_]

past performance is not indicative of future results

[StoutBench]

TownIdiot said:

Out of interest, what does it look like without "the big 7"?

Why would you exclude them? Unless you take the top 7 companies out of the UK also.

[xeny]

Panamax said:

Derek Chevalier said:

multiple expansion is also a factor.

I don't even understand what those words mean.

Part of valuation assessment of equities is the Price/Earnings ratio. If the price you pay is a greater multiple of the business' earnings, then you're getting worse value for money. You see this when a company, or indeed an entire market are described as "expensive"

The argument typically used to justify this is greater expectation for future growth.

If that growth starts disappointing, then the multiplier can contract, so you potentially get a double whammy of falling earnings and a reduction in share price multiplier of earnings (due to a loss of confidence in future earnings growth) and your premium pricing can disappear excitingly quickly.

[NowWatchThisDrive]

Phooey said:

NowWatchThisDrive said:

Sounds like the kind of thing Wallstreetbets et al wet themselves over but can't say I ever heard it mentioned in industry.

Again, I don't know much about it, or care to know but i think it's just another of many many indicators someone somewhere has made up. Apparently it has a 100% positive hit rate........ until it hasn't

Yep - a cursory look suggests n = 14 since 1945, which doesn't necessarily scream statistically bulletproof to me.

Frankly most technical indicators are just overfitted nonsense that retail brokers push on their customers to try and get them to trade more. And the customers lap it up because it makes them feel cleverer than they actually are.

Edited by NowWatchThisDrive on Friday 25th April 21:30

[okgo]

Hustle_ said:

past performance is not indicative of future results

One thing is fairly sure, it ain’t going to be here that does anything interesting anytime soon. America innovates, Europe regulates as oft joked by my colleagues over the pond.

[TownIdiot]

StoutBench said:

TownIdiot said:

Out of interest, what does it look like without "the big 7"?

Why would you exclude them? Unless you take the top 7 companies out of the UK also.

Just trying to get how a sense as to how much they skew this index.

And yes, if there was a similar number of stellar performers on a UK index then that would be something of interest.
If was just a general question, not really trying to prove any point.

[ooid]

TownIdiot said:

Out of interest, what does it look like without "the big 7"?

pretty much similar to FTSE.

We do need to move away from comparing equity markets to their economies (countries). One thing, Europe has a bank finance model and US has a market finance. Than you have the single currency and single massive market, when a company listed in USA, in Europe it is more differentiated. Investment professionals see equity markets in relation to sectors. Example, Technology - > USA, Banking and Finance -> Europe. Besides, Europe has an aging population so the slow growth comparing to USA is expected.

Comparing Europe and USA for market cap and their potential economic impact as countries, just became irrelevant now.

[Panamax]

xeny said:

The argument typically used to justify this is greater expectation for future growth.

Yes indeed. The "growth" bets in some companies share prices are very big. You see it in the pharma sector with so much volatility around the so-called obesity drugs.

My earlier comment re. Novo Nordisk is a case in point. Compare Eli Lilly,
https://www.reuters.com/breakingviews/obesity-drug...

[StoutBench]

TownIdiot said:

StoutBench said:

TownIdiot said:

Out of interest, what does it look like without "the big 7"?

Why would you exclude them? Unless you take the top 7 companies out of the UK also.

Just trying to get how a sense as to how much they skew this index.

And yes, if there was a similar number of stellar performers on a UK index then that would be something of interest.
If was just a general question, not really trying to prove any point.

Appreciate that. One thing that draws me to invest in the S&P500 rather than FTSE 100 or 250 is that fact that it's 500 companies with a country 5-6 times the population. Those two things along seem to me to be a safer spread bet then obviously coupled with the market historical data.

[xeny]

StoutBench said:

Appreciate that. One thing that draws me to invest in the S&P500 rather than FTSE 100 or 250 is that fact that it's 500 companies with a country 5-6 times the population. Those two things along seem to me to be a safer spread bet then obviously coupled with the market historical data.

Isn’t the logical extrapolation of that reasoning to invest in a whole world tracker?

[Derek Chevalier]

Panamax said:

S&P500

1 Jan 2000 = 1,450
24 April 2025 = 5,500 up by 280%

FTSE 100

1 Jan 2000 = 6,200
24 April 2025 = 8,400 up by 35%

These headlines may not be "income reinvested" but it's a huge mountain to climb.
https://www.ig.com/uk/news-and-trade-ideas/why-has...

I'd probably start with a more global benchmark, as even with divis invested, the FTSE has generated some average returns in recent years, which is why it's a firm favourite for DFMs to benchmark against!

If I go back to 1987 (using another source), and compare EM and S&P 500, the S&P didn't overtake EM until around 2021, so the hammering vs everything else is a recent phenomenon.

My point here is that the S&P 500 isn't a sure thing, as those who abandoned U.S. equities after 2010 can attest.

[TownIdiot]

Derek Chevalier said:

I'd probably start with a more global benchmark, as even with divis invested, the FTSE has generated some average returns in recent years, which is why it's a firm favourite for DFMs to benchmark against!

If I go back to 1987 (using another source), and compare EM and S&P 500, the S&P didn't overtake EM until around 2021, so the hammering vs everything else is a recent phenomenon.

My point here is that the S&P 500 isn't a sure thing, as those who abandoned U.S. equities after 2010 can attest.

It's interesting that excluding the big 7 performance is similar to here, and that's not exactly brilliant.

Is there a history of a small set of companies performing like this or it a unusual set of circumstances?

[732NM]

TownIdiot said:

It's interesting that excluding the big 7 performance is similar to here, and that's not exactly brilliant.

Is there a history of a small set of companies performing like this or it a unusual set of circumstances?

The robber barons of the late 19th and early 20th century is probably a good example of a small number of dominant players in the market and economy. They were broken up by force of law when they got too big.

[simon800]

TownIdiot said:

It's interesting that excluding the big 7 performance is similar to here, and that's not exactly brilliant.

Is there a history of a small set of companies performing like this or it a unusual set of circumstances?

I’d suggest that at any given time if you remove the performance of the top companies of an index from the index, the performance of the index would be worse…..

[muscatdxb]

Panamax said:

S&P500

1 Jan 2000 = 1,450
24 April 2025 = 5,500 up by 280%

FTSE 100

1 Jan 2000 = 6,200
24 April 2025 = 8,400 up by 35%

These headlines may not be "income reinvested" but it's a huge mountain to climb.
https://www.ig.com/uk/news-and-trade-ideas/why-has...

FTSE 100 has had a total return (including dividends) of 198% since 2000 based on a quick Google. Sure the S&P is even better, but the 35% number is pretty meaningless

We were also at 8800 prior to the Trump madness and with low valuations vs US bubbliness.

I have too much allocated to the UK for historical reasons, but I don’t think it’s been a huge financial mistake.

[TownIdiot]

simon800 said:

I’d suggest that at any given time if you remove the performance of the top companies of an index from the index, the performance of the index would be worse…..

If course it would.
To my unskilled eye the top 7 shares seem to have had absolutely extraordinary performance, and I was just wondering if that was likely to reoccur in a future cycle.

If we compare to the FTSE as an example has there been a cohort that has dragged the performance up in a similar way?

[Sheepshanks]

TownIdiot said:

To my unskilled eye the top 7 shares seem to have had absolutely extraordinary performance, and I was just wondering if that was likely to reoccur in a future cycle.

You could look at equal weight S&P500 to avoid too much mag 7 distortion.

[okgo]

TownIdiot said:

If course it would.
To my unskilled eye the top 7 shares seem to have had absolutely extraordinary performance, and I was just wondering if that was likely to reoccur in a future cycle.

If we compare to the FTSE as an example has there been a cohort that has dragged the performance up in a similar way?

As said before, to see such huge gains that would require the UK to innovate in some way, which it doesn’t, oil, fags and booze is what we’ve got. Slow and steady.