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Despite some tough economic challenges, the broad market index, the S&P 500, has performed well, adding 13.97% year to date (as of Aug 31). According to Andrew Slimmon, a Morgan Stanley analyst, the rally in the market is far from over and the S&P 500 will continue to witness gains fueled by the group of “Magnificent Seven” companies, namely Apple (APPL), Microsoft (MSFT), Google owner Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA) and Meta (META), all being the top 10 allocations of the index, as quoted on Yahoo Finance.
For investors optimistic about the market performance, ETFs that mirror the S&P 500 Index can be smart ways to capture potential gains. Additionally, beating the S&P 500 in the long run is difficult and investing in broad-market ETFs can help mitigate the effects of market volatility. SPDR S&P 500 ETF (SPY - Free Report) ,iShares Core S&P 500 ETF (IVV - Free Report) , Vanguard 500 Index Fund (VOO - Free Report) and SPDR Portfolio S&P 500 ETF (SPLG - Free Report) can be considered.
Reason Behind the Optimism
According to Andrew Slimmon, as quoted on Yahoo Finance, while the “Magnificent Seven” companies have had a great year so far, most of them are still valued at less than where they were at the end of 2021, the only exception being Nvidia, as told by him to CNBC's Street Signs. He also expects the share price of these companies to be pushed higher by a fast-moving fourth-quarter 2023.
The Morgan Stanley analyst predicts the benchmark index to reach levels close to 5,000 by the end of the year.
Is This Optimism Supported?
According to a Reuters article, in late July, Citigroup raised its outlook for the market index, forecasting it to reach levels of 5,000 points in 2024, citing a higher probability of the U.S. economy witnessing a “soft landing,” a driving factor behind the positive outlook.
Despite having different time horizons and price ranges, UBS equity analysts also maintain an optimistic outlook for the benchmark index. Per forexlive, UBS equity analysts have increased their price predictions for the S&P 500 Index in June 2024 to 4,700 points. They base this on their belief that company earnings will grow faster in 2024.
Additionally, analysts at UBS suggest that if artificial intelligence (AI) truly has a significant impact, economic growth remains strong and inflation decreases rapidly, the index could potentially reach as high as 5,200 points.
AI Rally to Boost the Index
AI has made a lasting impact across various sectors of society. It has extended its influence, leaving its mark in nearly every industry. Dan Ives of Wedbush Securities foresees that there will be an extra trillion dollars spent in the AI sector over the next 10 years. Analysts, as reported on CNBC, estimate that there is a $12 billion opportunity in the field of AI, indicating that the AI boom is still far from over (Read: Nvidia Earnings Show AI Boom Is Here to Stay: ETFs in Focus).
The S&P 500 Index has about 28.2% of its assets allocated to the information technology sector. This significant allocation positions the index to potentially benefit from the growing excitement and development around AI, supporting the optimism surrounding the price target for the benchmark index.
What Lies Ahead?
The optimistic view for the benchmark index is met with challenges, including the Fed's hawkish stance and the ongoing issue of sticky inflation levels. However, signs of cooling inflation does provide some relief.
According to Reuters, as per CME Group's FedWatch tool, it is widely anticipated that the U.S. central bank will keep interest rates steady during its September meeting but some uncertainty remains as to whether they will choose to pause or raise rates in November. Eric Rosengren, who was president of the Boston Fed from 2007 to 2021, believes that if the labor market and economic growth continue to slow down, the Fed might decide to stop increasing interest rates, as quoted on Reuters.
With JP Morgan and Bank of America curbing their recession projections for 2023 and forecasting that the U.S. economy will expand at a strong and steady growth rate, the positive outlook for the benchmark index is justified.
SPDR S&P 500 ETF has an annual fee of 0.09 and has amassed an asset base of $406.99 billion. Being one of the most widely known ETF, SPY has gained 18.83% year to date (as of Aug 31).
SPDR S&P 500 ETF has major allocations to Apple (7.36%), Microsoft (6.45%) and Amazon (3.26%). It has a Zacks ETF Rank #3 (Hold).
iShares Core S&P 500 ETF has a low annual fee of 0.03% and has gathered an asset base of $348.17 billion. IVV has gained 18.90% year to date (as of Aug 31).
iShares Core S&P 500 ETF has major allocations to Apple (7.33%), Microsoft (6.46%) and Nvidia (3.22%). It has a Zacks ETF Rank #2 (Buy).
Vanguard 500 Index Fund has a low annual fee of 0.03% and has gathered an asset base of $331.04 billion. VOO has gained 18.88% year to date (as of Aug 31).
Vanguard 500 Index Fund has major allocations to Apple (7.53%), Microsoft (6.47%) and Amazon (3.09%). It has a Zacks ETF Rank #2 (Buy).
SPDR Portfolio S&P 500 ETF has a low annual fee of 0.02% and has gathered an asset base of $20.09 billion. SPLG has gained 18.90% year to date (as of Aug 31).
SPDR Portfolio S&P 500 ETF has major allocations to Apple (7.33%), Microsoft (6.43%) and Amazon (3.25%). It has a Zacks ETF Rank #3.
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Investors Optimistic About S&P 500: ETFs in Focus
Despite some tough economic challenges, the broad market index, the S&P 500, has performed well, adding 13.97% year to date (as of Aug 31). According to Andrew Slimmon, a Morgan Stanley analyst, the rally in the market is far from over and the S&P 500 will continue to witness gains fueled by the group of “Magnificent Seven” companies, namely Apple (APPL), Microsoft (MSFT), Google owner Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA) and Meta (META), all being the top 10 allocations of the index, as quoted on Yahoo Finance.
For investors optimistic about the market performance, ETFs that mirror the S&P 500 Index can be smart ways to capture potential gains. Additionally, beating the S&P 500 in the long run is difficult and investing in broad-market ETFs can help mitigate the effects of market volatility. SPDR S&P 500 ETF (SPY - Free Report) ,iShares Core S&P 500 ETF (IVV - Free Report) , Vanguard 500 Index Fund (VOO - Free Report) and SPDR Portfolio S&P 500 ETF (SPLG - Free Report) can be considered.
Reason Behind the Optimism
According to Andrew Slimmon, as quoted on Yahoo Finance, while the “Magnificent Seven” companies have had a great year so far, most of them are still valued at less than where they were at the end of 2021, the only exception being Nvidia, as told by him to CNBC's Street Signs. He also expects the share price of these companies to be pushed higher by a fast-moving fourth-quarter 2023.
The Morgan Stanley analyst predicts the benchmark index to reach levels close to 5,000 by the end of the year.
Is This Optimism Supported?
According to a Reuters article, in late July, Citigroup raised its outlook for the market index, forecasting it to reach levels of 5,000 points in 2024, citing a higher probability of the U.S. economy witnessing a “soft landing,” a driving factor behind the positive outlook.
Despite having different time horizons and price ranges, UBS equity analysts also maintain an optimistic outlook for the benchmark index. Per forexlive, UBS equity analysts have increased their price predictions for the S&P 500 Index in June 2024 to 4,700 points. They base this on their belief that company earnings will grow faster in 2024.
Additionally, analysts at UBS suggest that if artificial intelligence (AI) truly has a significant impact, economic growth remains strong and inflation decreases rapidly, the index could potentially reach as high as 5,200 points.
AI Rally to Boost the Index
AI has made a lasting impact across various sectors of society. It has extended its influence, leaving its mark in nearly every industry. Dan Ives of Wedbush Securities foresees that there will be an extra trillion dollars spent in the AI sector over the next 10 years. Analysts, as reported on CNBC, estimate that there is a $12 billion opportunity in the field of AI, indicating that the AI boom is still far from over (Read: Nvidia Earnings Show AI Boom Is Here to Stay: ETFs in Focus).
The S&P 500 Index has about 28.2% of its assets allocated to the information technology sector. This significant allocation positions the index to potentially benefit from the growing excitement and development around AI, supporting the optimism surrounding the price target for the benchmark index.
What Lies Ahead?
The optimistic view for the benchmark index is met with challenges, including the Fed's hawkish stance and the ongoing issue of sticky inflation levels. However, signs of cooling inflation does provide some relief.
According to Reuters, as per CME Group's FedWatch tool, it is widely anticipated that the U.S. central bank will keep interest rates steady during its September meeting but some uncertainty remains as to whether they will choose to pause or raise rates in November. Eric Rosengren, who was president of the Boston Fed from 2007 to 2021, believes that if the labor market and economic growth continue to slow down, the Fed might decide to stop increasing interest rates, as quoted on Reuters.
With JP Morgan and Bank of America curbing their recession projections for 2023 and forecasting that the U.S. economy will expand at a strong and steady growth rate, the positive outlook for the benchmark index is justified.
ETFs in Focus
SPDR S&P 500 ETF (SPY - Free Report)
SPDR S&P 500 ETF has an annual fee of 0.09 and has amassed an asset base of $406.99 billion. Being one of the most widely known ETF, SPY has gained 18.83% year to date (as of Aug 31).
SPDR S&P 500 ETF has major allocations to Apple (7.36%), Microsoft (6.45%) and Amazon (3.26%). It has a Zacks ETF Rank #3 (Hold).
iShares Core S&P 500 ETF (IVV - Free Report)
iShares Core S&P 500 ETF has a low annual fee of 0.03% and has gathered an asset base of $348.17 billion. IVV has gained 18.90% year to date (as of Aug 31).
iShares Core S&P 500 ETF has major allocations to Apple (7.33%), Microsoft (6.46%) and Nvidia (3.22%). It has a Zacks ETF Rank #2 (Buy).
Vanguard 500 Index Fund (VOO - Free Report)
Vanguard 500 Index Fund has a low annual fee of 0.03% and has gathered an asset base of $331.04 billion. VOO has gained 18.88% year to date (as of Aug 31).
Vanguard 500 Index Fund has major allocations to Apple (7.53%), Microsoft (6.47%) and Amazon (3.09%). It has a Zacks ETF Rank #2 (Buy).
SPDR Portfolio S&P 500 ETF (SPLG - Free Report)
SPDR Portfolio S&P 500 ETF has a low annual fee of 0.02% and has gathered an asset base of $20.09 billion. SPLG has gained 18.90% year to date (as of Aug 31).
SPDR Portfolio S&P 500 ETF has major allocations to Apple (7.33%), Microsoft (6.43%) and Amazon (3.25%). It has a Zacks ETF Rank #3.