The SPDR S&P 500 ETF Trust (SPY) is one of the most widely traded exchange-traded funds (ETFs), just like the Invesco QQQ Trust (QQQ). The SPY made its market debut in 1993 and was the first exchange-traded fund listed in the United States. The SPY is designed to track the performance of the S&P 500 Index.
SPY provides investors with broad exposure to the US equity market, including a wide range of sectors such as technology, healthcare, consumer discretionary, and financials.
As of end November, 2024, SPY’s total assets under management were $624.83 billion, making it one of the largest and most popular ETFs in the world.
S&P 500 Forecast
Bull Argument: In a research memo released at the end of November 2024, Goldman Sachs analysts said US stocks could begin their year-end rally as early as next week. “Next week typically starts the year-end rally, including some of the best trading days of the year into Thanksgiving,” they wrote, according to an article from Bloomberg.
Meanwhile, in the same article, Mary Ann Bartels, chief investment strategist at Sanctuary Wealth, was quoted as saying her firm expects the S&P 500 to continue to make gains. They have a target range of 7200 to 7400 points for 2025. “We believe the longer-term track is for the S&P 500 over the back end of the decade to reach 8,000-10,000 points,” she added.
Bartels explained that her firm’s view is driven by productivity gains from artificial intelligence and a strong US economy. The bullish view is also based on lower corporate taxes being maintained, lower interest rates, and the “ongoing stimulus from the Biden Administration’s pieces of legislation that allows companies to continue to post strong earnings growth.”
Bear Argument: While the firm is not bearish on the S&P 500, Piper Sandler investment strategist Michael Kantrowitz said in October that the S&P 500 was overvalued by approximately 8%. While Kantrowitz stated that “an 8% over-valuation is no reason to get bearish,” it may be something for investors to consider.
One analyst who is bearish on the index is Stifel’s Barry Bannister, chief equity strategist at the firm. According to a report from MarketWatch, Bannister said earlier this month that the S&P 500 is closing in on “mania” levels with stocks becoming more expensive.
“Even allowing for the best-case scenario of a U.S. soft landing, and despite a potential ramp higher for U.S. fiscal spending (affects inflation and yields), as well as China global cyclical stimulus (affects dollar, oil, inflation) and lastly a geopolitical ‘reckoning’ (affects everything), the S&P 500 is [in] a mania, nearing a 3-generation (>80 year) valuation high,” Bannister wrote. He sees a near-term rise followed by a potentially painful pullback in the index.
Our View: The SPDR S&P 500 ETF Trust (SPY) is a great ETF for investors seeking broad exposure to the US equity market. It is a cost-effective, liquid, and reliable investment option for long-term investing. However, investors should be mindful of potential market risks and consider diversifying their portfolios to reduce volatility.
Even so, the SPY remains a cornerstone ETF for both individuals building diversified portfolios and institutions managing large-scale equity exposures.
SPDR S&P 500 ETF Performance
| Year | Performance |
|---|---|
| 2024 (YTD) | +26.47% |
| 2023 | +26.19% |
| 2022 | -18.17% |
| 2021 | +28.75% |
| 2020 | +18.37% |
The S&P 500 (and SPY as a result) is widely regarded as a barometer of the overall US economy and has historically delivered solid returns.
SPY Top Holdings (as of November 21, 2024)
| Company | Weight |
|---|---|
| Nvidia | 7.16% |
| Apple | 6.90% |
| Microsoft | 6.09% |
| Amazon | 3.68% |
| Meta Platforms | 2.44% |
| Alphabet | 1.95% |
| Tesla | 1.87% |
| Berkshire Hathaway | 1.72% |
| Alphabet | 1.61% |
| Broadcom | 1.51% |
Who Should Buy the SPY ETF?
The SPY is ideal for long-term investors and those bullish and seeking to participate in the consistent growth of the U.S. economy over time.
The ETF is also great for investors looking to gain exposure to a wide range of industries in a single fund, given it tracks the S&P 500 which has stocks across various sectors.
Furthermore, passive investors following an index-tracking strategy may find the ETF attractive, given its simplicity and low cost.
Meanwhile, the SPY may not suit aggressive traders. While SPY offers steady growth, it may not provide the high volatility some active traders seek.
In addition, those looking for concentrated exposure to specific sectors like technology or healthcare might prefer ETFs like QQQ or XLV.
