S&P 500

S&P 500

09 January 2018Reading time: 2 minutes

Throughout 2017 the S&P 500 continuously realized positive returns and the annual return almost reached 22%. This was partly due to a strong profit growth of American companies and to the expectation that the corporate taxes in the United States will be lowered. According to the S&P Dow Jones Indices this is the first “perfect calendar year’ for the S&P 500 since 1928. Especially notable is the fact that at the end of 2017 no significant profits were taken by investors, which is normally the case. If this positive trend will continue in 2018 will probably become clear in mid-January, when companies listed on S&P 500 will present their quarter results and expectations for 2018.

Analysts from Société Générale think that the S&P 500 might not be able to continue this upward trend in 2018, because of the current higher validations and increasing bond returns. Stocks from the index can no longer be referred to as ‘bargains’ according to the analysts, because these are traded above their long term average. The French bank also expects that the return on ten year old American government bonds might reach 2,7% by the end of 2018, which could have a pressurizing effect on the stock prices of American shares.

Société Générale also expects that the economic growth of America will slow down towards 2020. Therefore analysts estimate the S&P 500 could end at approximately 2,500 points by the end of 2018, which would mean that the index will barely move compared to the end of 2017.

Every year the Saxo Bank presents an annual list of extreme economical expectations. One of these expectations is that the S&P 500 might experience a ‘flash crash’, as in 1987. Analysts point out that after a year of extreme low volatility, assets worldwide are driven up to a levels which could indicate a bubble. According to Saxo Bank a political shock could lead to a strong correction and the S&P 500 might quickly plummet more than 25% as a result of the ‘flash crash’.

The average expectation of analysts is that companies listed on the S&P 500 might realize a growth of the earnings per share of 12% throughout 2018. It remains to be seen how the future will turn out.

Vontobel products on S&P 500 are tradable at DEGIRO, Lynx and Interactive Brokers.

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30/05/2020 12:41:21