Back to top

Image: Bigstock

JPMorgan Sees S&P 500 at 4,800: ETFs to Tap

Read MoreHide Full Article

Since the end of June, the S&P 500 has jumped about 10%. And according to JPMorgan, there’s still more upside ahead and the index could reach 4,800 in the next 2-3 months. With the benchmark index currently hovering around 4,100 (at the time of writing on Aug 27, 2022), JPMorgan’s target implies a possible upside of 16%, as quoted on MoneyWise, published on Yahoo Finance.

Let’s delve a little deeper.

Inflation May Ease in 2023

According to Kristalina Georgieva, managing director of the International Monetary Fund, global interest rates will likely keep rising until 2023 and that’s  when continued rate hikes will cool inflation and help stabilize economies and markets, as quoted on CNBC.  If continued recessionary fears remain rife, oil prices may ease more in fear of less economic activity. This, in turn, will tame inflation and restore economic growth.

Upbeat Technical Charts?

Marko Kolanovic, chief global markets strategist at JPMorgan, pointed out that the S&P 500 “is on the cusp of breaking important momentum signals” such as the 200-day moving average. The S&P 500 has largely traded below its 200-day moving average in recent months. Kolanovic suggests that if the index can break above this 200-day moving average, it could see inflows “on the order of ~$100 billion,” per the above-mentioned article.

Markets Are Pricing Rate Hikes Fast

Investors have re-priced stocks quickly this year to bake in sky-high inflation and the Federal Reserve’s faster interest rate hikes. Markets have already priced in a likely U.S. economic recession this year and fat Fed rate hikes in the coming days. That is why the yield curve has inverted this year.

Consumers Still Healthy

The consumer is still healthy, supported by low debt loads, adequate savings and rising wages as a result of a tight labor market. But there is growing evidence that lower-income consumers are starting to feel the pain due to stubborn inflation. It would make sense for such a consumer to spend less on discretionary items and more on everyday necessities.

ETFs to Watch

If you follow the above-mentioned factors, you may want to tap S&P 500 ETFs. Against this backdrop, investors may track S&P 500 ETFs like Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) and SPDR S&P 500 ETF (SPY - Free Report) .

Investors can also play the growth part of the index with (SPYG - Free Report) and the value part of the index with (SPYV - Free Report) . SPDR Portfolio S&P 500 High Dividend ETF Fund (SPYD - Free Report) is a good bet for the dividend plays of the index. SPYD yields 3.81% annually.

Investors can also bet on leveraged S&P 500 ETFs like Direxion Daily S&P 500 Bull 3X Shares (SPXL - Free Report) , ProShares Ultra S&P500 (SSO - Free Report) and ProShares UltraPro S&P500 (UPRO - Free Report) while the index is on an uptrend.

Published in