To The Moon

$S&P 500(.SPX)$ Historically, breaking all-time highs has often preceded further gains rather than immediate reversals. Studies of periods following new record closes show the index posting positive returns in the large majority of cases over subsequent 3–12 months and longer horizons, with average forward gains in the double digits in some analyses (e.g., positive in 13 of 14 observed instances in one review, averaging ~14%). Bull markets can persist for years once momentum builds, supported by compounding earnings growth, especially in a tech/AI-led environment.

Supportive factors for further upside:

• Continued strong corporate earnings growth (particularly in Magnificent 7/tech sectors driving recent rallies).

• Stable or declining rates post-2025 cuts, supporting valuations and economic activity.

• Potential dovish guidance from the Fed (e.g., signaling cuts later in 2026 if data softens).

• Long-term secular trends like AI productivity gains.

Countervailing risks:

• Elevated valuations: Forward P/E around 22–22.5 (above 5- and 10-year averages); trailing/Shiller CAPE ~31 (historically high, comparable to periods of exuberance).

• Possibility of profit-taking, volatility spikes around FOMC, or corrections (10–20% pullbacks are normal even in bulls).

• Macro uncertainties: inflation reacceleration, labor market shifts, geopolitical risks, or policy surprises (including political influences noted in coverage).

• Mean reversion at psychological round numbers like 7,000.

Short-term reactions can be mixed—clarity from Fed guidance could catalyze upside if perceived as balanced/dovish, or trigger selling if it disappoints.

Lock in Profits or Position for the Next Leg?

Staying invested (positioning for continuation) has historically rewarded long-term investors. Missing the best days/periods after highs significantly reduces compounded returns. Time in the market generally outperforms timing attempts.

• Taking some profits (e.g., rebalancing to target allocation, trimming outperformers, or shifting to bonds/cash/international) can manage risk, lock in gains after a strong run, and provide dry powder for dips—especially prudent at stretched valuations or ahead of event risk like FOMC.

• Diversification remains key: Even in a U.S. bull market, consider global exposure (including Singapore/Asia perspectives via SGD assets), bonds, or defensive sectors to mitigate concentration risk in tech-heavy indices.

In summary, the index has demonstrated resilience and room to advance in past cycles after record highs, but current valuations and upcoming policy signals introduce uncertainty. Monitor the FOMC outcome closely for directional clues, while maintaining a disciplined, long-term approach rather than reacting to headlines. Markets can remain irrational longer than expected, but sustainable gains ultimately tie to fundamentals like earnings and growth.

Yes, the S&P 500 has recently opened and traded above the 7,000 milestone for the first time, amid strong tech-driven momentum. Recent closes (as of late January 2026) hover around 6,978–7,014, with intraday or opening breaches confirming the breakout after prior levels in the high 6,900s.

The Federal Reserve's January 27–28, 2026 FOMC meeting (first of the year) is widely expected to result in no rate change, maintaining the federal funds rate (recent range around 3.5–3.75% after three cuts in 2H 2025). CME FedWatch Tool prices in ~97% probability of a hold (97.2% in some reports), aligning closely with the query. Markets will focus heavily on Chair Powell's press conference, updated economic projections, and any signals on the timing/frequency of potential future cuts (or extended pause) amid jobs/inflation data and external pressures.

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📝 Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

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