The Standard & Poor’s 500 Index is a collection of some 500 different stocks, all of which are chosen based primarily on their industry category, size, and their liquidity. It is regarded as the barometer of the US equity market and the most accurate gauge of performance of the large-cap US equities. This allows investors to assess the risk and reward of large companies. In order to be listed on the S&P 500, companies must have a market capitalization above $6 billion and have common stock listed on the NYSE or NASDAQ. Some of the world’s most successful companies call the S&P 500 home, and range from industrial conglomerates such as Apple, Sony, Amazon, Salesforce.com and many other world-class corporations. Click here to view the list.
The S&P 500 Index is managed by a committee. The committee, which is comprised of the top economists and analysts working in the market today, brings the collective experience to the table. The goal of the committee isn’t to choose stocks that are most likely to beat the market, instead, the index committee picks stocks with the purpose of providing an accurate portrayal of the stock market and its current trends to investors.
As a result, the S&P 500 serves an important function for economists and investors alike; acting as a chief indicator of market health, and a way to spot signs of any potential market challenges as they arrive. Click here to read more about S&P 500 Index.
The question is, what does the future hold for S&P 500?
Performance to Date
Let’s look at S&P 500 past performance. Past performance does not guarantee future results but it shows the resistance of the index during the period of economic and political volatilities.
The S&P 500 Index has undoubtedly performed very well over its course. In 2017 the return was 21.8%. Today, we are currently looking at the year-to-date return of 11%.
Since April 2016 the S&P 500 Index has increased by 27% and over the last 5 years it made a cumulative return of 63% and 300% since it hit the bottom 9 years ago. This means that for every $1,000 invested - investors earned $3,000.
So, what does the future hold for the S&P 500 Index?
Different analysts say different things. Some say that the US market is over-valued therefore the Index will decrease in value and others believe that it is on the rise.
Every analyst interprets information differently. When looking at the S&P 500 Index, not only the US market health should be taken into account, but other factors such as companies’ individual performance along with the industries they operate.
S&P 500 is one of the most diversified indexes investing into a wide range of sectors including technology, financials, health care, consumer products, Industrials, Energy, Utilities, Materials and Telecom. However, these companies do not only operate and generate profit in the US, most are global companies generating profit in Europe, China, Japan and other parts of the world. 60% of Apple’s revenue is generated outside US with Europe and China being the second and third largest contributors. Amazon generates over 30% revenue outside the US and over 60% for ExxonMobile. Therefore, if the US market declines, the revenues would be offset by the sales from other parts of the world, minimizing any potential loss.
Now let’s look at other factors:
Politics: Despite the volatility in politics that Donald Trump brought about with his nomination to the presidency, the markets were up. We have experienced some volatility over the last few months, but the market still holds strong. Trump’s intentions of loosening regulations and decreasing taxes will positively affect the US companies and economy.
Economy: In April 2018, the US unemployment rate fell to 3.9% from 4.1% from the previous month. This is the lowest rate the US has seen since December 2000.
Low interest rates: Low interest rates affect the stock price from a fundamental perspective. The higher the interest rates, the more expensive it is to borrow for companies, the lesser their profits for shareholders since companies have to pay back interest.
Prices and Inflation: This is one of the major factors showing whether the economy is doing well or not. The prices have been stable and have not seen a major increase. This is also backed by a stable inflation rate of 2.1% in 2017 and 2.1% for the month of march.
Another aspect we took in mind is the technical trading charts. These charts are read by technical traders who try to predict the ups and downs in the price. The technical traders read the peaks and the troughs, which tell them a story of whether there is a downward or upward trend.
When on 9th of February the index price fell to $2,638 a new low, it didn’t go further down, but rebounded at the next trading day by 1.5%. We may put a hypothesis there, as to whether this may be the new “low” trough or price resistance zone. This would mean that the index price is not expected to fall below the $2,638 mark.
How to participate in the S&P 500 Index
Investing in S&P 500 Index for savings and retirement planning is the best advised solution. This has been highly recommended by Warrant Buffet and by many other financial advisors. Click here to read his opinion.
Buying into the S&P 500 Index is not accessible to many. One stock is priced at $2,670. However, there are ways.
For example, the Regular Contribution Savings and Retirement Plan offers you to contribute on a monthly, quarterly, semi-annual and annual basis over 10, 15 and 20 years.
The plan is very well protected and guarantees your savings not to reduce in value.
Over the last 5 years, the S&P 500 Index made 63% return and 300% over the last 9 years.
Receive more information about the regular S&P 500 Index Plan and how the minimum return is guaranteed contact us at email@example.com
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