The S&P 500 Index, despite enduring a challenging end to the summer, has reached an impressive milestone in resilience not witnessed in half a decade. For 100 consecutive trading sessions, the benchmark for American equities has managed to avoid a decline of at least 1.5%, per a Bloomberg article, as quoted on Yahoo Finance.

Investors continue to funnel funds into the stock market, as evidenced by a $13.4 billion net inflow into U.S. exchange-traded equity funds during the week ending September 13, marking the ninth week of net additions in the past 12 weeks according to LSEG Lipper data, per the Bloomberg article.

Although the index has logged four losses exceeding 1% in the past two months, daily fluctuations have remained notably soft, suggestive of conditions last observed in 2018. The optimism surrounding the economy's ability to withstand the Fed rate hikes led to the rally. Moreover, the Fed has been less-hawkish this year due to cooling inflation. Many analysts are of the view that rates are now peaking. 

Can the Momentum Continue?

Thomas Martin, a senior portfolio manager at Globalt Investments, commented on this phenomenon, stating, "It's unusual, but there haven't been reasons for big drops in the stock market. Unless the Fed really surprises investors this week, there isn't going to be a reason to reposition because we know rate hikes are nearly done”, as quoted on Bloomberg.

The road ahead is a bit tricky. The S&P 500 index has gained 16% in 2023. Economists anticipate one more rate hike before year-end. But rates are likely to be higher for longer. Complications are likely to arise from surging oil prices, which might hit $100 by the year-end (per some analysts). This should put an upward pressure on inflation and spoil all calculations of economists and the Fed (read: Oil to Hit $100 Soon? Sector ETFs to Benefit/Lose).

The S&P 500's performance in September raises concerns for the rest of the month. Historical data from the Stock Trader's Almanac shows that over the past two decades, the market tends to reach its September peak around the 11th trading day, typically corresponding to a Monday. So, the history for the upcoming few days doesn’t look favorable.

On the positive side, corporate earnings should act as a tailwind. There has been a notable improvement in the earnings outlook in recent months, with positive revisions for several key sectors since the start of Q2 helping offset continued pressure on estimates for others.

Estimates for Q3 of 2023 are holding up much better than had been the case in the comparable periods of other recent quarters, per Earnings Trends issued on Sep 13, 2023. Some recently-released data points including retail sales and jobs data came in at decent, pointing to chances of continued rally in the S&P 500. Recession fears are ebbing. Plus, the holiday season is around the corner, which is normally an upbeat period for the stock market.

ETFs in Focus

Against this backdrop, investors should keep a tab on S&P 500 ETFs like Vanguard S&P 500 ETF (VOO Quick QuoteVOO - Free Report) , iShares Core S&P 500 ETF (IVV Quick QuoteIVV - Free Report) and SPDR S&P 500 ETF Trust (SPY Quick QuoteSPY - Free Report) .

Investors can also play the growth part of the index with SPDR Portfolio S&P 500 Growth ETF (SPYG Quick QuoteSPYG - Free Report) and the value part of the index with SPDR Portfolio S&P 500 Value ETF (SPYV Quick QuoteSPYV - Free Report) . SPDR Portfolio S&P 500 High Dividend ETF Fund (SPYD Quick QuoteSPYD - Free Report) is a good bet for the dividend plays of the index.