S&P 500 Index: Share Price, Chart and Forecast
The S&P 500, a stock market index of 500 of the largest US companies, is one of the most popular investments in the world. The S&P 500 is suitable for short-term traders, with ideal volatility for day-trading, and long-term investors, who appreciate it being one of the most diversified investments in the world.
In this analysis, we will explain what the S&P 500 is, how it works and its composition. We will also look at its future prospects. Finally, we’ll provide you with valuable tips on how to invest in S&P 500 as well as a tutorial to trade this index now.
What is S&P 500?
The S&P 500 is the world's most famous stock market index and the most familiar to the general public. When the media talks about the "market falling," they usually refer to the S&P 500, and when fund managers report on their performance, it is often compared to the S&P 500. All of this speaks to the critical importance of the S & P 500 to anyone interested in the financial markets. Below, you will learn more about what the S and P 500 is.
S&P 500 Definition
The S&P 500 is an index based on 500 large companies listed on the US stock exchanges. Created on March 4, 1957, it is named after the financial rating agency Standard & Poor's, which manages it.
Representative of the American stock market, it has gradually dethroned the Dow Jones Industrial Average (which includes the 30 largest companies) and the NASDAQ (benchmark index for American technology stocks). Even at the global level, the S&P500 is considered a benchmark index since it includes many companies, not necessarily American, but listed on the American markets that act as a "barometer" of the world economy.
It is also interesting to note that the S and P 500 represents nearly 80% of the total capitalization of the US markets. Note that 84.4% of the total capitalization of the S&P500 comes from the NYSE, 15.5% from the NASDAQ and 0.1% from the AMEX (the third-largest US market).
S&P 500 Today and History
The SP500 is an index that has changed dramatically in its composition throughout its history. Each year, several companies enter and exit the index. For example, just since the beginning of 2021, 15 stocks have been added and 15 removed.
Finally, in terms of the major crises that have caused the S&P 500 to fall over its history, there have been 3 major ones over the past 25 years. However, as we will see just below by analyzing the historical evolution of the S&P 500 price, the index has always emerged victorious from each crisis.
The S&P500 Index Price Evolution
Below, we will describe and analyze the S&P 500 history based on a monthly S&P 500 chart.
S&P 500 Chart
While the S&P 500 was worth about 500 points in the mid-90s, it peaked at over 1500 in March 2000, tripling in value in less than 5 years, as we can see on the S&P 500 monthly chart below :
The Internet crisis then plunged the SP500 into a downward trend, bringing it to a low of $768 in October 2002, seeing its value divided by 2 in 2 and a half years.
The S&P 500 then went on a 5-year uptrend, briefly breaking the 1500-point barrier 5 years later, in September 2007. But the financial crisis of 2008 wiped out the gains of the previous 5 years in just over a year, and then some, as the S&P 500 bottomed at 666 points in March 2009.
Since then, the S&P 500 history has been on a long-term uptrend, although the covid-19 pandemic briefly challenged this trend. Indeed, the S&P 500 fell from around 3400 points to 2200 points in less than 2 months in the face of the pandemic, a drop of 35%. However, since the March 2020 low, the S&P 500 index has risen by more than 100%, reaching an all-time high of 4545 points in September 2021.
S&P 500 Index Performance
The S&P 500 has rewarded its investors with solid returns over its history. For example, the annual return of the S&P 500 index has only been in the red in 10 of the last 50 years. The median annual return of the SP500 since its inception is over 12%, and over 15%, including dividends. In other words, $1 invested in the S&P 500 in 1970 would represent $182 today!
Finally, we note that over the last two full years, 2019 and 2020, the S&P 500 has risen by 28.88% and 16.26%, respectively.
What influences the price of SP500?
Since the S & P 500 is considered to be the best barometer of the US economy, major U.S. and global economic trends are the primary factors in the long-term price performance of the S&P 500. Thus, the state of the global economy as measured by major economic indicators such as GDP or the unemployment rate, or central banks' monetary policy can directly impact the price of the S&P 500.
Also worth noting: 3 technology stocks represent 16% of the total index. As a result, trends in the technology sector can have a significant impact on the index and news about these three stocks in particular.
The S&P 500 Companies
This section will be dedicated to studying the S&P 500 companies. In particular, we will review the companies that have the most weight in the index and its sectoral distribution.
The stocks that have the most weight in the S&P 500
Because of how the S&P 500 is calculated, the evolution of certain stocks has more influence on the index than others. In this respect, here are the 3 stocks that have the most weight in the SP500:
- Apple: 6.2% of the S&P500
- Microsoft: 5.9% of the S&P500
- Amazon: 3.9% of the S&P500
Sector breakdown of S&P 500 stocks
To anticipate the impact of major economic trends on the S&P 500, it is also essential to know the sector breakdown of S&P 500 stock index:
How Are The S&P 500 Companies are Chosen?
Since 2005, the index has taken into account the number of free-floating shares. In practice, many of the 500 companies listed on the exchanges have only a limited impact on the index's variation. The ten largest equity funds in the SP500 had a total weighting of approximately 26.6% in the index at the end of June 2021.
Criteria for inclusion in the S&P 500 index:
- S&P 500 companies must be U.S.-based.
- The company's minimum market capitalization must be $11.2 billion.
- At least 50% of the shares must be floating.
- The company must be listed on the New York Stock Exchange (NYSE) or NASDAQ.
- The ratio of annual revenue to market capitalization must be at least 0.3.
- The minimum monthly trading volume is 250,000 shares in each of the six months preceding the valuation date.
- Transparency of financial information.
S&P 500 List of Stocks
Below is a table showing the 30 largest stocks in the S&P 500 stock index.
S&P 500 Companies – Top 30
S&P 500 Companies – Top 30
|Facebook Inc. Class A||FB||Technology|
|Alphabet Inc. Class A||GOOGL||Technology|
|Alphabet Inc. Class C||GOOG||Technology|
|Tesla Inc||TSLA||Consumer Discretionary|
|Berkshire Hathaway Inc. Class B||BRK.B||Financials|
|JPMorgan Chase & Co.||JPM||Financials|
|Johnson & Johnson||JNJ||Healthcare|
|UnitedHealth Group Incorporated||UNH||Healthcare|
|Visa Inc. Class A||V||Financials|
|Home Depot Inc.||HD||Consumer Discretionary|
|Procter & Gamble Company||PG||Consumer Staples|
|PayPal Holdings Inc||PYPL||Technology|
|Walt Disney Company||DIS||Communication Services|
|Mastercard Incorporated Class A||MA||Financials|
|Bank of America Corp||BAC||Financials|
|Comcast Corporation Class A||CMCSA||Communication Services|
|Thermo Fisher Scientific Inc.||TMO||Healthcare|
|Cisco Systems Inc.||CSCO||Technology|
|Exxon Mobil Corporation||XOM||Energy|
|Verizon Communications Inc.||VZ||Communication Services|
This S&P 500 list of companies shows how much the index is diversified, thus suitable for long-term investment.
Should I Trade the S&P 500? Points to Consider
The S&P 500 has strengths that make it suitable for all investor profiles, as seen in this list of S & P 500 specifics:
- Volatility: The daily fluctuations of the S&P 500 index allows day traders to take advantage of many opportunities each day.
- Diversification: With 500 companies in the index, the SP500 is probably the most diversified index globally, allowing it to weather crises without too much damage.
- Dividends: You’ll receive dividends by investing in the SP500 if you hold S&P 500 ETF.
- Leverage: Most online brokers, including ZFX, offer traders high leverage for trading stock indices through S&P 500 CFDs, which is a crucial benefit for day traders.
- Ability to short: When trading the S&P 500 via CFDs, it is just as easy to bet on the S&P 500 going up as it is to bet on the S and P 500 going down, so it is possible to make money whether the S&P 500 goes up or down.
How Can I Trade the S&P 500?
Ready to invest in the SP500? Discover how to do so through the leading broker ZFX.
ZFX, a world class MT4 Broker
ZFX was created in 2018 and is a secure, broker regulated by the FCA. It provides its clients with the highly popular MT4 trading platform. Through ZFX, you can invest in a wide array of products, from leading stocks to forex and indexes.
How to trade the S&P 500 index easily?
Buying S&P 500 index through the broker ZFX is very simple and fast. Indeed, the account opening is done entirely online, and takes only a few minutes. Here’s how to proceed:
- 1 - Register with ZFX
- 2 – Fund your account
- 3 - Verify your ZFX account
- 4 – Trade the S&P 500 index
1 - Register with ZFX
Start by going to the ZFX website, and click on "Open an account". You will then have to fill in a registration form with several personal details, which will be verified by SMS.
Then, click "Next”. ZFX will then display your MT4 login and password, and invite you to download the platform.
2 – Fund your account
To do this, you will need to click on the "make a deposit" button on the screen that is displayed immediately after registration.
You will then be asked to choose a payment method, for example Mastercard:
On this screen you will be asked to indicate the deposit amount and then click on the "Confirm Deposit" button. You will then be asked for your credit card information before the final validation of the payment.
3 – Account Verification
Finally, verify your account by sending supporting documents.
As shown in the image above, you will need to upload the documents directly to the ZFX website
4 - Buy S&P 500 index
You can now invest in the S&P 500 through MT4, the platform provided by ZFX. Simply log into MetaTrader 4 and follow the instructions. Then, select SP500 and invest the amount you wish.
Tips and Things to Know Before Investing in the S&P 500
This section will present you with some critical information and tips that will help you trade the S&P 500 in the best possible way.
- The S&P 500 opens at 9:30 am and closes at 4:00 pm local time, Monday through Friday.
- However, it is possible to trade the S&P 500 outside of official trading hours with S&P 500 futures and SP500 CFDs.
- Stock indices are trading vehicles where technical analysis works very well. Therefore, chart analysis should not be overlooked when trading the S&P 500.
- Following the economic calendar, especially the US statistics is necessary to analyze the S&P 500 and anticipate volatility spikes correctly.
- It is possible to trade the S and P 500 without risk with a demo account at the broker ZFX, an ideal opportunity to practice before moving to actual trading with real money.
- It’s important to use a S&P 500 live feed for quotes, even if you’re investing long-term
S&P 500 Future, Forecast and Predictions
Let’s now look at the future of the S&P 500 by discussing different types of forecasts.
Recommendations and S&P 500 Forecast of Analysts
According to a recent CNBC survey of 15 major banks, the S&P 500 stock index is expected to rise to 4,600 points by the end of 2021, according to the median forecast. For the year 2022, the banks are even more optimistic. UBS, for example, expects a new all-time high for the S & P 500 at 5000 points, as does Credit Suisse.
Another way to assess analysts' views for the S&P 500 is to look at their recommendations for the stocks that carry the most weight in the index, namely Apple, Microsoft and Amazon.
- For Apple stock, 19 out of 25 analysts recommend buying, and 6 recommend holding. The average target of $170 implies a potential upside of 16%.
- Microsoft stock also show positive ratings from professionals, with all 23 analysts following the stock recommending a Buy, with an average target of +12%.
- Finally, Amazon stock are also unanimous, with 31 analysts recommending a Buy with an average target of $4,220, 25% above current prices.
Analysis of SP500 from a fundamental perspective
Although the economy has started to return to normal following the pandemic thanks to the spread of vaccines, it is still far from where it was before covid-19 paralyzed the world.
However, most indicators are green, and the remainder of 2021 and 2022 should see a marked acceleration in the US and global economic recovery. This will be the principal fundamental bullish factor for the S&P 500.
In the nearer term, it is interesting to note that analysts are forecasting an average EPS increase of more than 27% for Q3 2021 for S&P 500 companies. This is also a fundamental bullish factor for the price of the S&P 500 index.
Technical analysis of S&P 500
As can be easily seen at first glance on the weekly S&P 500 chart, the current trend in the SP500 Index is very bullish.
The index is certainly showing some short-term weakness after an all-time high, but this correction seems for the moment to be a mere breath of fresh air, and therefore a buying opportunity. Moreover, we can estimate that the trend will remain immediately bullish as long as the S&P 500 holds the 4100 points.
Bottom Line: Is S&P 500 a Good Investment Now?
The S&P 500 is an almost unavoidable investment, as it is the best way to gain exposure to the US stock market, the largest financial market in the world. It is a favorite trading vehicle for day traders because of its high liquidity, clear trends, and ideal volatility. But the historical returns of the index also show that it is a very efficient long-term investment.
Moreover, the future looks bright on many levels for the index, as the return to normalcy of the economy following the pandemic should greatly benefit it. Moreover, the long-term S&P 500 chart trend remains powerfully bullish, with recent all-time highs.
If you wish to easily trade the S&P 500 now, the broker ZFX is an optimal solution, offering competitive fees and MT4, among other key benefits.