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He S&P 500 has enjoyed further stratospheric growth this century. Since the first trading day of 2000, the value of the S&P 500 has increased a staggering 297%. To put this in context, the FTSE 100 It has grown 'only' 20% in that time.
Past performance is not always a reliable guide to the future. But here are several reasons why I think the S&P 500 will continue to rise.
Stronger economy
Markets hate uncertainty. And with November's presidential election on a knife's edge, Wall Street stocks could see a bumpy rally in the next month.
Regardless, I still expect US stocks to continue to perform well over a longer time horizon. This is due to phenomena such as the United States' large consumer base, its diverse economy, and its significant geopolitical influence.
The forecasts also remain encouraging in the short term. Today, the IMF announced that it expects the U.S. economy to expand 2.3% in 2024. That's above the average 1.3% increase expected for advanced economies.
And in 2025, US growth is estimated at 1.7%, compared to 1.5% in countries such as the United Kingdom, Germany and Japan. If accurate, this could cause New York-listed stocks to outperform foreign stocks over the period.
Possible fall of the dollar
The S&P 500 is full of multinationals that report their profits in US dollars. This can have huge advantages for investors.
One advantage is that when the dollar weakens, these companies' foreign turnover becomes more valuable once translated into dollars, increasing their reported profits. This earnings growth phenomenon can, in turn, help drive stock prices higher.
The good news (at least for stock investors) is that the dollar could face tough times ahead. Analysts at Vanguard, for example, believe there is a 75% chance that the US dollar will depreciate over the next decade.”with a modest decline of 1.1% annualized, the most likely outcome“.
<h2 class="wp-block-heading" id="h-tech-focus”>Technological focus
The S&P 500's exposure to high technology is one of the main reasons for its dizzying performance since 2000. It is encouraging that the outlook for 'Big tech' remains as bright today as it was a quarter of a century ago.
Segments such as artificial intelligence (ai), quantum computing, autonomous vehicles, green technology and robotics have significant growth potential that could propel the index into the clouds.
Thanks to the stocks called the Magnificent Seven, S&P 500 investors have excellent exposure to each of these phenomena. Apple, Alphabet, amazon, Goal, microsoft, NVIDIAand tesla Together they represent 31% of the total weighting of the S&P 500.
This is what I have done
In light of all the above, I opened a position in the HSBC S&P 500 ETF (LSE:HSPX) for my Self-Invested Personal Pension (SIPP) earlier this year.
This exchange-traded fund (ETF) tracks the performance of all of the 500 largest companies in the American stock market. And with an ongoing fee of 0.09%, it does so at an extremely low cost.
The fund allows me to capture potential growth opportunities as well as manage risk effectively. Their exposure to hundreds of different companies in different sectors helps me spread the risk effectively.
The downside is that this ETF contains a lot of cyclical stocks like banks, consumer goods manufacturers, and banks. And that's why it runs the risk of underperforming during economic crises. However, in the long run, I still think it could be a great investment for me.
