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The S&P 500 Index has fallen 21% since the beginning of the year. The last time it fell that much during the first half of the year was in 1970, Bloomberg calculated
The first half of 2022 could be the worst for the S&P 500 index since 1970, writes Bloomberg. The S & P 500 index, which includes shares of the 500 largest U.S. companies by market capitalization, has fallen 21% since the beginning of the year amid expectations that high inflation and tighter monetary policy of the Federal Reserve will lead the U.S. economy into recession. The last time the S&P 500 index fell that much during the first six months of the year was more than 50 years ago, the agency estimated.
What is the average stock price of the s&p 500?
U.S. inflation soared to the highest levels in more than 40 years this year, hitting 8.6 percent in May with a target of 2 percent. To keep inflation in check, the Fed, the nation’s central bank, raised interest rates by 75 basis points on June 15. This was the first time in 28 years that the rate was raised by 0.75 basis points at once. The Fed has signaled that it plans new hikes.
At the beginning of last week, the S&P 500 index went into a bear market phase. A bear market is considered to occur when stocks lose more than 20% from their previous peaks. The S&P 500 made a historical high of 4,818.62 points on January 4. On Monday, June 13, it closed at 3,749.63, 22.18% below the high.
According to Societe Generale Bank strategist Manish Kabra, the decline is not over yet. “We still haven’t seen a true bottom for the stock market,” Kabra believes. A 1970s-style inflation shock could cause the S&P 500 Index to fall about 33% more from current levels to 2,525 points, the expert predicts. This will occur against a backdrop of stagnation in the U.S. economy and a run-up in inflation. On June 22, as of 19:50 Moscow time, the value of the S&P 500 index was 3,774 points.
Cabra thinks a milder “typical” recession scenario would see the s&p index price drop to 3,200 points, down nearly 15% from its close on Tuesday, June 21. That is, the outlook for the S&P 500 stock price today is rather pessimistic.
The key takeaway from the 1970s situation is the risk that if investors brace for high inflation going forward, stock markets will begin to focus on the real, rather than nominal, earnings per share rate, which is likely to turn negative this year, Societe Generale warned. It will lead to further decreases in the American stock indices.
Stock price chart s&p 500: forecasts
What will be the list of s&p 500 companies and stock price? Michael Wilson of Morgan Stanley also thinks that the S&P 500 should drop another 15-20%, to about 2,900 points, for the market to fully reflect in prices the scale of the coming economic downturn.
The expert at Morgan Stanley considers that further collapse of the U.S. stock market is inevitable. Even if the U.S. economy manages to avoid a recession, the stock market will still fall, he believes. In this scenario, the S & P 500 index is likely to fall another 7-10% – to about 3400-3500 points, as corporate earnings decline from inflation.
How to invest in the S&P 500 Index
Many people think about investing in the world’s largest economy, like the United States. This can be done with the S&P index fund price, a basket of stocks of more than 500 American companies. Our article is about why invest in the s and p 500 and what investment options are available.
Why invest in the S&P index fund vanguard?
Everyone uses the services or products of Apple, Microsoft, Visa, Google, McDonald’s and others. If you buy a stake in a fund that owns securities of the largest companies in the U.S., it can be the best cash investment you can make.
To qualify for the sp500 list, a company must meet the following criteria:
- market capitalization – $5 billion
- trading volume – from 250 thousand shares per month.
- The sp 500 index of companies for the past 100 years gives an average return of 8-10% per annum in dollars!
The S&P 500 from rating agency Standard & Poor’s is a major U.S. stock index. Its dynamics influence the election of a U.S. president, the GDP of exporting countries, and wage growth. Each U.S. president has tried to raise the value of the index before their re-election.
The U.S. stock market outperforms all others in such criteria as:
- investor confidence;
- integrity of ownership;
- protection of minority shareholders;
- variety of available financial instruments.
Building such a super-profitable stock portfolio on your own is quite difficult. You have to have a lot of money and regularly make appropriate changes in the portfolio of securities by monitoring the market prices of shares.
Also, the equity financial instruments of Google or Amazon are exorbitantly expensive, so collective purchasing, for example through an ETF (Exchange Traded Fund), is suggested. Alternatively, you can use the Dow Jones today.
Investment options based on the S&P 500 index
There are several ways to invest in a package of U.S. stocks:
- buy a stake in a fund on a stock exchange;
- invest in a mutual fund;
- make a purchase through an overseas broker;
- Buy individual shares.
Purchasing through a broker
Every investor can open an account with a broker. To do this, it is necessary to:
- Choose a broker;
- to register at its website;
- Download and install the trading terminal;
- to deposit the broker’s account;
- to start operations at the exchange by opening orders.
A person gets a real opportunity to buy assets only after replenishment of the account. Without depositing money, only demonstration mode is available.
ETFs can be used to place funds in spx stock
However, there are a lot of complications when buying an asset this way:
- Opening an account with a foreign broker involves processing and sending a lot of documents;
- Cashless wire transfers are required to fund the account, as well as approval by the bank’s currency control department;
- Investments in selected assets through the opening of buy or sell orders require special training and financial literacy.
Collecting individual shares
You may not buy a share of a unit, but pick up financial instruments on your own. This is done on stock exchanges. Before deciding to buy shares, you should decide on the objectives, the time horizon of the investment and the acceptable risk.
For the long term. The investor is focused on paying dividends and their size. In this case, the investor should be interested in the S&P index average return of more than 3%. Of the stocks included in the S&P 500 Index, companies in four sectors showed the strongest performance in 2018: telecommunications, energy, real estate, and utilities.
The telecom sector stocks returned more than 7% and the energy sector companies returned 3%. The real estate sector demonstrated an average yield of almost 4%; the utilities sector – 4.5%. The fact that their market value on the stock market does not fluctuate, like securities of companies from other sectors also explains attractiveness of shares of these companies.
In the medium term. An investor in this case earns from the growth in the value of shares. The S&P 500 Index is down 4.4 percent in 2018, something that hasn’t happened since the financial crisis. But panic won’t help here. At the end of the same 2018, stock prices of many large companies also declined. However, individual securities in the S&P 500 today showed high returns.
SP index after hours: Conclusions
Beginners are afraid to invest for the long and medium term, so they are interested in short-term investing. However, it consists of buying/selling and holding securities for speculative purposes: from a few minutes or even seconds to several days. Only professionals can earn on scalping and high-frequency trading.
Thus, it is possible to invest in the S&P 500 stock index to secure future income. Investors can do this in several ways: through a broker, through mutual funds, or by purchasing individual stocks themselves. Each way has its own advantages and disadvantages.
When choosing how to invest, one should consider a lot of things: financial literacy, the amount of risk that can be accepted, the term of the investment, and the financial instruments themselves. Collecting stocks individually is advisable if one does it professionally.