The S&P 500 is the biggest index in the world. The companies in the index have a market value of more than $24 trillion. This makes them slightly higher than the entire GDP of the United States, which stands at more than $20 trillion. The biggest companies in the index are the likes of Apple, Microsoft, and Amazon. Yesterday, the index made history when it crossed the psychologically-important level of $3,000. This was a major milestone, which means that the index has gained by more than 1.25k% since 1988.
The index broke this record as Jerome Powell delivered his remarks to congressional leaders yesterday. In the statement, the chair said that the Fed was prepared to do everything in its power to continue supporting the economy. This is after he said that more risks to the economy had emerged. These risks include the slowing down of the economy, which is partly attributed to the ongoing trade tensions between United States and China.
There is also a trade war that is going on between Japan and South Korea, which are some of the most important economies in Asia. The mini trade war between the two countries started after Tokyo vowed to stand behind its decision to restrict exports that are vital to South Korea’s technology industry. Other risks to the global economy are the Brexit issue and the emerging tensions in the Middle East.
In his statement yesterday, the Fed chair said that:
Economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the US economy. Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and Brexit. And there is a risk that weak inflation will be even more persistent than we currently anticipate.
Investors cheered the announcement from the Fed chair that the bank might lower interest rates. They were anticipating for that going with the recent statements from the Federal Reserve. Lower interest rates are usually better for companies because they usually spend less money on interest payments. This is particularly essential now that American companies have more than $14 trillion in debt. However, low rates hurt savers, who generate little returns from their savings accounts.
The testimony was reinforced with the release of the minutes of the past meeting. The minutes said that many officials believe that an accommodative policy will be in the interest of the economy. The minutes said that:
Many judged additional monetary policy accommodation would be warranted in the near term should these recent developments prove to be sustained and continue to weigh on the economic outlook.
The S&P 500 index ended the day at $3004, which is above all the short, medium, and long-term moving averages. The RSI has moved to almost the overbought level while the MACD and signal line of the MACD indicator have been moving higher. The index will therefore likely continue with the upward momentum.