The S&P 500 is a stock market index that tracks the performance of 500 of the largest companies listed on stock exchanges in the United States. It is widely regarded as a leading indicator of U.S. equities and a barometer of the overall US economy. Some of the top companies in the index include Apple, Amazon, Meta Platforms, and Alphabet (Google).
Composed of companies across various sectors, the S&P 500 provides a broad representation of the US stock market. As such, it is often used as a benchmark for the performance of investment funds and is a popular choice for index-based investment strategies.
S&P 500 Price, Chart & Dividend Yield
The S&P 500 has had a tremendous year so far, climbing to all-time highs. With the US Federal Reserve expected to start cutting rates soon, many analysts and investors now expect further upside for the index.
Dividend Yield: 1.319%
S&P 500 Price Forecast
Given the potential for rate cuts and the emergence of GenAI over the last couple of years, analysts are mostly bullish on the prospects for the S&P 500 this year. Nevertheless, there are still a few who remain cautious. Here is one bull and one bear argument for the S&P 500:
The Bull Argument: Investment firm Oppenheimer recently raised its target for the S&P 500 to 5,900 from 5,500. The firm also increased its earnings projection to $255 from $250 for the S&P 500 in 2024. Oppenheimer analysts explained that the target and earnings projection raises assume a higher price-to-earnings multiple of 23.1 times, up from 22 times with its earlier target. Oppenheimer also noted recent economic data that suggested “the current bull market has legs to run higher.”
The Bear Argument: In May 2024, analysts at Stifel warned that they believe the S&P 500 could be on the verge of a move lower. The firm, at the time, noted that inflation hadn’t cooled. However, that has more recently changed. Nevertheless, Stifel said in its note that they “have been wary of a broad S&P 500 correction in the middle quarters of 2024.” They explained that they “have been of the view that the ~5 quarters 1Q22 to 2Q23 were a ‘pseudo-recession’ and the Fed has already harvested all the normal post-recession disinflation we would expect.”
Analyst Targets (as end July, 2024)
- Oppenheimer: 5,900
- Goldman Sachs: 5,600
- Morgan Stanley: 5,400 (for June 2025)
- UBS: 5,600
- Wells Fargo: 5,100-5,300
- Barclays: 5,600
- JPMorgan: 4,200
- BofA: 5,400
- Deutsche Bank: 5,500
- Citi: 5,600
- RBC Capital: 5,700
Who Should Buy the S&P 500
The S&P 500 offers a broad exposure to the U.S. economy. It’s not a direct investment but rather a representation of a basket of stocks. However, understanding who might benefit from exposure to it and which investors may prefer to invest in it can be helpful.
Long-Term Investors: Those seeking to participate in the long-term growth of the US economy often find the S&P 500 a suitable investment. Historically, the index has delivered positive returns over extended periods.
Diversification Seekers: As a broad-based index, the S&P 500 can be a core holding for investors aiming to diversify their portfolios across various sectors and industries.
Passive Investors: Those preferring a hands-off approach to investing can benefit from index funds tracking the S&P 500. These funds offer low-cost exposure to the market.
Bullish on the US Economy: Investors who believe in the continued growth and strength of the US economy may find the S&P 500 a suitable investment vehicle.
Retirement Savers: Many retirement plans offer S&P 500 index funds as a default investment option due to their historical performance and diversification benefits.
Trading The Index
The S&P 500 index is one of the most commonly traded instruments globally, but not everyone trades it in the same way.
If you have heard of trading the SPY, or the SPX, those are both avenues into the S&P 500 index, but they are not one and the same thing. This is how the S&P is traded via leveraged products such as futures, or options, via ETFs. You cannot buy the S&P 500 index in the same way you would a direct stock, and ETFs remain the most popular investment angle for those with long-term horizons in mind.
S&P 500 Top 10 Companies
| Company | Market Cap (End July, 2024) |
|---|---|
| Apple | $3.34 Trillion |
| Microsoft | $3.16 Trillion |
| Nvidia | $2.78 Trillion |
| Alphabet | $2.06 Trillion |
| Amazon | $1.90 Trillion |
| Meta Platforms | $1.18 Trillion |
| Berkshire Hathaway | $943.63 Billion |
| Eli Lilly | $724.48 Billion |
| Broadcom | $705.81 Billion |
| Tesla | $702.18 Billion |
