At the close of trading Thursday afternoon, the S&P 500 hit an all-time high, capping an impressive first quarter with an exclamation point for the stock index. Taken with record highs on the Dow and major advances for the NASDAQ, the clear message is a rebound for the U.S. economy. All-time highs from 2007 have finally been eclipsed, suggesting to analysts that more growth is in store.
One reason investors feel confident is the markets’ ability to shrug off a crisis like the Cyprus debt catastrophe. Serious concerns dominated the world news leading into the markets’ open on Monday, yet the holiday-shortened week was a resounding success for the S&P 500, which saw each of its 10 categories rise. Health care companies led the strongest charge. Events like the U.S. fiscal cliff posturing have similarly had limited effects on the bullish feelings of investors.
Shortly after the close of Thursday’s trading, analysts wondered where the S&P 500 was headed next. Its close above 1,569 makes many observers consider 1,600 a given (it has added over 10 percent since the start of 2013). The Dow Industrial index’s record surge in 2013 have put a temporary chill on tech stocks like Apple (NASDAQ:AAPL) – one of the sore spots in the S&P 500’s inexorable rise.
On the bearish side of things, the improved performance of the dollar could temper expectations of a continued surge in stock indices. EU debt issues put the dollar in position to rebound against the euro; greenbacks have gained on the yen and other currencies as well. While that trend makes imports cheaper for U.S. consumers, it drives up the prices for foreign customers, especially in commodities that are only valued in dollars.
Nonetheless, it is a trade off most investors working with dollars will make. A higher dollar valuation means inflation is not likely to rear its head anytime soon. Investors concerned about companies that export a significant amount of products can likewise turn toward companies with a robust domestic business, AT&T (NYSE:T) among them. When the dollar is strong, stock indices generally feed off this news. With the S&P 500 and Dow performing at record levels, good news is contagious.