The new record-breaking run on the S&P 500 (INDEXSP: .INX) overnight is helping fuel another big day on the S&P/ASX 200 Index (ASX: XJO).
The S&P 500 closed up 1.2% in the US market yesterday, finishing the day for a new closing high of 5,308.2 points.
The benchmark US index has been on a tear this year, with the new closing high marking the 23rd new record close in 2024.
In late morning trade on Thursday here in Australia, the ASX 200 is up 1.34% at 7,857.6 points. That puts the ASX 200 within a whisker of its own record closing high of 7,896.9 points, set on 28 March.
As for the big US tech stocks, the Nasdaq Composite Index (INDEXNASDAQ: .IXIC) closed up 1.4% yesterday.
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What's sending the S&P 500 and the ASX 200 soaring?
The biggest tailwinds helping lift the S&P 500 overnight and the ASX 200 today look to be more good news on the inflation front out of the United States.
The US consumer price index (CPI) increased 0.3% in April, down from 0.4% in March. That saw the annual inflation rate retreat to 3.4%, down from 3.5% a month earlier.
Core CPI, which excludes volatile items like food and energy prices, was also up 0.3% for an annual rate of 3.6%. That's the lowest core inflation level recorded by the world's top economy in three years.
As you'd expect, this is fuelling renewed hopes of earlier interest rate cuts from the US Federal Reserve, which should prove a boon for equities.
What are the experts saying?
Commenting on the US inflation data that sent the S&P 500 to new all-time highs and is seeing the ASX 200 rocket today, National Australia Bank Ltd (ASX: NAB) said (quoted by The Australian Financial Review), "US CPI was in line with expectations, but came as a relief for markets after a string of upside surprises."
NAB added, "Pricing for a September start to Fed easing firmed, the US dollar showed broad-based declines, and equities rose to fresh all-time highs."
CIBC Private Wealth's Gary Pzegeo said (quoted by Bloomberg):
The market likes it. The news on core inflation was better than expected. Retail sales also showed some deceleration from the previously hot consumer sector. Taken together, this supports a Fed rate-cut in the fall.
Nationwide's said Mark Hackett added:
Equity markets continue to show impressive resilience. The sustainability of the recent rally will rely on the belief that we are heading for a 'soft landing', with easing inflation and moderate growth.
So, with the S&P 500 at new record levels and the ASX 200 close to setting its own new record, can equities continue to rally in 2024?
According to Infrastructure Capital Advisors' Jay Hatfield, very much so.
Hatfield said:
We continue to believe that our 5,750 target on the S&P will prove to be conservative as global rate cuts and AI propel global stock and bond markets higher after global cuts commence, with the ECB to act in early June.
Hatfield's "conservative" end of 2024 target represents a potential upside of more than 8% for the S&P 500 over the next seven months.
One ASX share to capture the S&P 500 performance
There's a surprisingly simple way for Aussie investors to mirror the performance of the S&P 500 without buying all 500 large-cap companies in the US index. Namely, via an index-tracking ASX-listed exchange-traded fund (ETF), like the SPDR S&P 500 ETF Trust (ASX: SPY).
The ETF provides exposure to those 500 stocks with a single investment, aiming to track the performance returns of the S&P 500. Management costs come to just under 0.10% per year.
Over the past 12 months the ASX ETF is up 28%.
