Will the S&P 500 continue its record breaking run?

The S&P500 (SPX) accomplished a historic milestone last week. For the first time in its 64-year history, the Index recorded seven straight record level closes. The Index closed on Friday 02/07/21 at 4352.34, up by 0.75% for the day, up by 1.59% for the week, and up by 2.02% for the seven record-setting days.

Events bookending the Index’s growth over this timeframe were Congress passing a US$1.5 trillion infrastructure spending bill and a robust Nonfarm Payroll report.

Infrastructure spending set to boost infrastructure stocks

Setting off the SPX’s record run was the announcement on 24 June that the Biden Administration had struck a deal to pass a sizable bipartisan Infrastructure bill. By the opening of the market on 25 June, The SPX was trading 0.58% higher. Naturally, the SPX is, in part, comprised of the most significant US construction, utility, and manufacturing Companies. These companies will likely benefit from the Government’s heavy (and overdue) investment in the country’s infrastructure. Companies such as Fortinet Inc (NASDAQ: FTNT) and Qualcomm Inc (NASDAQ: QCOM), who will be integral in building out the country’s digital infrastructure, were some of the big gainers over these seven days, up by 3.4% and 1.9%, respectively.

It might be best to keep a keen eye on news regarding additional government spending in this area. The Biden Administration has already indicated that they want more infrastructure spending and are aggressively pursuing this line.

Nonfarm Payroll

The Nonfarm Payroll report, released on Friday (2 July), beat expectations by 150K. In total, 850K jobs were added to the US economy, against an expectation of 690K. By the end of the Friday session, the Index was up by 32.4 points, accounting for half of the week’s gains.

SPX futures are trading slightly lower on Monday, indicating that Friday’s jubilance might be weakening before the start of the US trading week. The Futures have plenty of time to reverse as the US markets are closed on Monday due to the observance of the country’s national holiday, Independence Day.

Where can the S&P 500 head for the remainder of 2021

YTD, the Index is up 17.6%. Quickly browsing the Index’s historical growth data, double-digit figures close to 20% are not all that uncommon. Taking the previous five years as an example, starting from 2020, the Index grew 16.3%, 28.9%, -6.2%, 19.4%, and 9.5%.

If we want to make history as a predictor of the future, we could note that the SPX has never closed lower for the year after logging double-digit growth in the first half of the year. However, this fact is unrelated to the probability that the SPX could be lower than its half-year position by the close of the year.

At least in the short term, I would expect the jubilance in the market to continue. The Index is startlingly close to crossing the 4350.00 level. Perhaps it will achieve this feat sometime this week. Further afield, 4360.00 and 4400.00 are some barriers for the Index to travel in the immediate term.

If we want to be a little more pessimistic, we could look at some retracement points for the Index. The 50% Level appears to be an obvious point of retracement, although the resistance at this point would have to switch to support. A more appropriate level for retracement might be in the middle of the 61.8% and 100% levels. At this point, approximately 4191.00, there exists a historical story of support.