The S&P 500 hit a new record. Why the milestone does (and does not) matter for your 401(k)

The S&P 500 has hit yet another milestone this year, ending above 5,000 for the first time.

It’s good news for Americans’ 401(k)s, which are heavily invested in stocks, and comes just three weeks after the index notched its first record close since January of 2022.

Tom Hainlin, national investment strategist at U.S. Bank Wealth Management, called the record a “symbolic milestone.”

“It’s a big, round number,” he told USA TODAY. “It’s a record high. But I think for the average person with a 401(k), it still suggests that the economy seems to be doing well.”

Why is the S&P 500 up?

The S&P 500 closed Friday at 5,026.61, up 0.57%.

The market’s performance has been bolstered by signs that the Federal Reserve has ended its rate hikes and may cut rates this year. Excitement around artificial intelligence advancements has also pushed up companies’ stock prices.

“We’ve gone through a pandemic … We’re in two wars. And yet, there just tends to be a gravitational pull upward over the longer-term” for stocks, said Kristina Hooper, chief global market strategist at investment management company Invesco, who also noted that surging interest rates have been a challenge over that time.

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Why should I care about the S&P 500?

So is this a big deal for Americans holding investments in a 401(k) retirement plan?

Yes and no.

The S&P 500, an index that includes 500 leading publicly traded companies, is regarded as one of the best gauges of Wall Street’s health. When the benchmark index goes up, Americans’ 401(k)s tend to go up as well.

“It’s a broad group of very important stocks,” said Stephen Suttmeier, Bank of America’s chief equity technical strategist.

But while the 5,000 milestone is making headlines, experts say it may not sustain that level for long.

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