Don’t Worry About S&P 500 at Record Highs, Says UBS. What History Says Is Next.

The S&P 500 notched its 21st record close of the year on Wednesday and futures tracking the benchmark stock index pointed to little change in sentiment on Thursday. Investors could well be wary about a bull run that looks like it is peaking—but those worries may be misplaced, according to UBS.

The S&P 500 has marched more than 10% higher since the start of 2024, with gains fueled by both investor expectations of interest-rate cuts from the Federal Reserve and the continued outperformance of tech stocks. The frenzy over artificial intelligence has helped tech, with names like Nvidia, Super Micro Computer, and Meta Platforms all notching impressive rallies.

Such a run is fated to attract doubters and bears, or even those who point to stock market valuations that look lofty. “Stock markets are enjoying the best of all worlds, buoyed by a resilient U.S. economy and speculation that Fed rate cuts are just around the corner, helping to justify stretched valuations,” Marios Hadjikyriacos, an analyst at broker XM, wrote in a note this week.

Mark Haefele, chief investment officer at UBS Global Wealth Management, has a message: Worry not. “All-time highs often generate investor concern that markets have peaked. Such worries are not supported by history,” Haefele wrote in a Thursday note.

As the team at UBS pointed out, the S&P 500 has traded within 5% of a record 60% of the time over the past 60 years. Moreover, since 1960, the index has seen an average return of 11.7% in the 12 months following a record . Even being cautious and counting that 11.7% return from the S&P 500’s first record in this cycle—hit Jan. 19—the index has more room to run. Having closed at 5,248 points on Wednesday, the index is up 8% from levels seen at the Jan. 19 close.

“Despite this, some investors may hesitate to add to equity allocations at market highs,” Haefele wrote. For those with an abundance of caution, equity-market-neutral strategies, often used by hedge funds, “can ease these worries,” he said.

“These funds have the potential to mitigate concerns related to tech bubbles, central banks’ policy uncertainties, and high market valuations by employing strategies that take both long and short positions in stocks,” Haefele wrote.

Equity-market-neutral funds may not be in reach of all investors. Those who still feel the pull of pessimism may just want to capture some profits—or trust history and keep holding the S&P 500.

Write to Jack Denton at [email protected]