The S&P 500 index hit a new milestone this week, crossing above 2,000 for the first time in its history. The new record high wasn’t actually any more special than any previous record high, other than for its number. Big, round numbers catch attention and 2,000 is a big, round number.
What’s always missing in the conversation are considerations of inflation, economic growth and math. If stock prices rise in reaction to inflation, then they should rise over time. Similarly, if stock prices are influenced by economic growth, then they rise as the economy expands. History shows that over the long term, stock prices reflect earnings growth, which in turn are impacted by both inflation and economic expansion. Therefore, the major stock indexes have set and risen above record levels and are expected to continue to do so in the future (with periodic interruptions along the way).