Record High Watch for the S&P 500

It has only been about two months since the market spiraled into the April 8 correction low. The fall from grace was sharp and painful, as the S&P 500 went from a record high of 6,144 on February 19 to the April 8 correction closing low of 4,983, marking a peak-to-trough drawdown of 18.9%. Peak panic and peak policy uncertainty triggered indiscriminate selling, as the administration’s reciprocal tariff announcement created "sell now, ask questions later" sentiment among most investors. To the surprise of many, the Treasury market failed to attract any safe-haven flows amid the chaos, pushing yields substantially higher across the curve. The move in the bond market caught the White House’s attention, prompting the announcement of a 90-day pause on most reciprocal tariffs. The pivot to a more diplomatic trade policy was accompanied by subsequent progress in trade negotiations and better-than-feared S&P 500 earnings.

The recovery has been nothing short of impressive as the broader market quickly pared its correction losses and climbed back toward record highs. Technology — the largest S&P 500 weight (~32%) and the hardest hit during the drawdown — has led the charge with nearly a 34% rally since April 8. Communication services, industrials, and consumer discretionary round out the rest of the recovery leaderboard with gains of over 20%. Defensive sectors, including consumer staples, healthcare, and utilities, have underperformed significantly over the last two months. The shift back to cyclical leadership and broad participation in the rally off the correction lows are key factors supporting a sustainable recovery for the broader market.

Returns Into and Out of the Correction Lows

Source: LPL Research, Bloomberg, 6/11/2025
Disclosure: Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested directly.

Good Things Come to Those Who Wait

Investors have been waiting nearly four months for the S&P 500 to reach a record high. While for many, it may feel like an eternity given all of the volatility and market drama since February. However, the waiting game could be much worse when comparing the current pause in new highs to prior periods. For example, it took the S&P 500 6,249 trading days (~25 years) to recapture the pre-Great Depression highs set in 1929. Fortunately, we suspect the wait could be over soon — not a bold call considering the S&P 500 is only around 2% away from recapturing the February 19 high at 6,144.

If the market registers a new high, the next obvious question from investors is, what happens next? As the saying goes, momentum often begets momentum, an adage also supported by historical price action. The scatterplot below compares the number of trading days between record highs on the S&P 500 and the index’s performance 12 months after each new high. To eliminate some of the noise and focus more on meaningful record highs, we filtered for new highs occurring at least 60 trading days apart. As highlighted in the “S&P 500 Returns After Record Highs” chart, returns skewed positive after a new record was reached, with the index generating average and median 12-month returns of 9.7% and 8.6%, respectively. Furthermore, 74% of the 25 periods analyzed produced positive returns over the 12-month period, though past performance does not indiciate future results. 

S&P 500 Returns After Record Highs* (1954-2024)

Source: LPL Research, Bloomberg 6/11/2025
*Filtered for new highs occurring at least 60 days apart.
Disclosure: Past performance is no guarantee of future results. All indexes are unmanaged and can’t be invested in directly. The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P 90.

Summary

A record-high watch is now in effect for the S&P 500 as it hovers about 2% below its February high. Technically, a close above 6,144 would validate a breakout to new highs. Bullish but not overbought momentum, relatively light investor positioning, and sanguine but not stretched investor sentiment all suggest this rally could have more room to run. The return of cyclical leadership and broad participation since the April 8 low provides additional technical evidence of a sustainable recovery. Historical data also suggests momentum tends to continue after a record-high drought finally ends. While the technical setup continues to improve, fundamental and macro risks remain. A lot of good news is arguably priced into the market, longer duration Treasury yields remain uncomfortably high, and trade policy uncertainty is still elevated despite some notable progress.

The U.S. economy continues to hold up well, highlighted by last week’s better-than-feared employment report, and the S&P 500 is fairly valued. Any further material gains will likely require an upside earnings surprise, lower-than-anticipated tariff rates, passage of President Trump’s “Big Beautiful Bill” with limited concessions, and carefully balanced lower Treasury yields.