‘I’m a finance expert – here’s what you need to know about the soaring S&P 500’ | Personal Finance | Finance


Stocks and shares being tracked on a screen

MoneyMagpie lays out the facts about the S&P 500 (Image: Getty)

In the buzzing realm of stock markets, a historic milestone has been marked: the S&P 500 has now breached the elusive 5,000 threshold for the very first time in its illustrious 67-year history.

But what’s fuelling this exuberance in stocks across the Atlantic? Is now a good time to invest or should you actually take your money out of US funds in case there’s a big bubble burst about to hit us?

Here’s what I think people need to know about the S&P 500 before making any decision as to whether they should invest or steer clear entirely.

What Exactly is the S&P 500?

The S&P 500 stands as a venerated barometer of US stock market prowess, encompassing 500 titans of American enterprise. Laden with tech heavyweights like Apple, Amazon, Microsoft, and Tesla, it offers investors a gateway to the bastions of American corporate might.

If you’re seeking exposure to the titans of US industry, investing in an S&P 500 fund ideally a tracker or ETF for value presents potential for profit, at least in the short-term.

An investor views stocks and shares performance

The S&P 500 has caught the eye of investors (Image: Getty)

How has the S&P 500 Been Performing Lately?

On a triumphant Thursday,February 22, the S&P 500 made waves as it notched up its largest daily gain in over a year-a whopping 2.11 percent.

The index, a stalwart tracker of 500 heavyweight corporations listed on American bourses, closed the day at a staggering 5,087.03.

It massively eclipsed the FTSE 100 and continues to outstrip it.Echoing the ‘500’ triumph was the Dow Jones Industrial Average, which also etched its name inthe record books with a significant surge on the same day, culminating in a close at 39,069.11, after a robust 1.18 percent ascent.

Alas, for UK investors, the transatlantic jubilation failed to translate into gains for British-listed entities. Come Friday, February 23, the UK’s flagship share index, the FTSE 100, barely budged, mustering a meagre 0.07 percent uptick following a rather lacklustre week.

Is This Déjà Vu? Another Tech Bubble?

For seasoned observers, the spectre of the dotcom bubble’s ghost may loom large. The early 2000s saw tech stocks haemorrhage a collective $5 trillion, a sobering reminder of market exuberance’s potential pitfalls.

“But this time it’s different,” they say, invoking the perennial refrain of the cognoscenti. Yet, the age-old adage rings true – past performance is no guarantee of future results.

The realm of AI teems with promise and potential, with untold fortunes awaiting the bold. However, Nvidia’s vertiginous ascent, from a humble $39 to a stratospheric $785 per share, underscores the mercurial nature of market valuations.

In the grand tapestry of investing, uncertainties abound. Whether the present tech bull run heralds an era of sustained prosperity or masks the ‘greater fool theory’ in action remains a conundrum.

Stay calm!

In times of market exuberance, the wisdom of Warren Buffet serves as a beacon. His counsel to “be fearful when others are greedy and greedy when others are fearful” resonates.

In the current milieu, Buffet’s sage advice cautions against recklessness, urging a tempered approach in navigating the tech landscape’s frothy waters.

Whether the current tech renaissance heralds a new dawn of prosperity or masks the harbingers of a bubble remains to be seen.

As always, it’s a question of spreading your wealth across various different assets. If you would like to dip your toes in the S&P 500 waters, there are cheaper tracker funds or ETF (Exchange-Traded Fund) such as the Vanguard S&P 500 UCITS ETF or iShares Core S&P 500 UCITS ETF.

If you are keen on delving deeper into the intricacies of investing, our fortnightly MoneyMagpie Investing Newsletter offers invaluable insights, free of charge and with no strings attached.

What’s Driving the Recent Stock Surge Stateside?

The latest rally owes much of its heat to a certain sector’s meteoric rise – tech. Enter the ‘Magnificent 7’ stocks, some mentioned above (Tesla, Meta, Apple, Google et al) comprising a mere sliver of the S&P 500 yet wielding a staggering 30 percent of its total clout.

Why the spotlight on this elite cohort, you ask? Well, it was one of these illustrious members, Nvidia, that single-handedly propelled the S&P 500 into orbit on that fateful Thursday.

Nvidia, once a humble entity founded in 1993, ascended to newfound prominence over the past year, riding the tidal wave of artificial intelligence (AI) fervour. Initially famed for enhancing gaming graphics, Nvidia’s pivot to AI hardware chips has been the linchpin behind its vertiginous valuation surge, especially since the second quarter of 2023.

This particular Thursday witnessed Nvidia’s market value soaring to unprecedented heights, with a jaw-dropping $277 billion surge, marking the largest single-day increase in a company’s market worth. The catalyst? Rosy forecasts that quashed any lingering doubts among investors about the AI boom reaching its zenith.

It’s also noteworthy that alongside Nvidia’s stellar ascent, fellow AI-centric stocks like Marvell Technology and Synopsys also experienced an upward trajectory, further fuelling the tech frenzy.

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