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What Awaits the S&P 500 ETFs After the Best YTD Rally Since 1997?

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The S&P 500 booked an awesome August and logged the best year-to-date performance since 1997, per a MarketWatch article. The article said that since 1971, the S&P 500 has observed an average year-to-date gain of 6.07% through Aug 31, according to Jefferies. This year, the S&P 500 is up 20% so far.

The S&P 500 is currently hovering around the all-time high. Solid U.S. economic data points, easy monetary and fiscal policies and vaccine distribution have led to this upsurge. Tech stocks have mainly been responsible for the S&P 500’s monumental achievement.

Upbeat earnings have also favored the S&P 500.For the 466 S&P 500 members that have reported Q2 results already this reporting season, total earnings are up 97.8% on 25.8% higher revenues, with 86.9% beating EPS estimates and 86.9% topping revenue estimates, per the Zacks Earnings Trends issued on Aug 18, 2021.

Against this backdrop, investors may be interested to know if the S&P 500 has potential for further rally.  

What’s Ahead for S&P 500?

Ryan Detrick, chief market strategist at LPL Financial, pointed to the historical performance going back to 1954. It shows that the last five times the S&P 500 rose more than 15% through the end of August, stocks registered a positive performance over the next four months of the year four times, as quoted on the same MarketWatch article (read: Guide to the S&P 500 ETF Investing).

“In fact, the average return in the final four months after a great start to the year is 4.2%, with a very impressive median return of 5.2%. Both numbers are above the average, and the median return for all years during the final four months is 3.6%”, Detrick said, as quoted on the MarketWatch article.

In any case, the fourth quarter is mostly upbeat for Wall Street.  According to moneychimp.com, a consensus carried out from 1950 to 2020 has revealed that the S&P 500 delivered an average return of 0.62% in October, 1.53% in November and 1.39% in December.

Apart from the historical data, the seasonality of the fourth quarter is also great for the S&P 500. With the final quarter of the year approaching, all eyes have turned toward the performance of retailers as the October-November period embraces the key holiday season. As loads of sales-boosting events like Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas fall in this quartile, the sector generally sees a sales boost.

Apart from the superbly well-positioned technology sector, the S&P 500 has considerable weight in the healthcare sector, which is defensive in nature. Amid the ongoing health emergency, no one can ignore the necessity of this sector, let alone the sector’s durability amid the growing need for medication and treatments for other critical diseases.

ETFs to Watch

Against this upbeat backdrop, investors may track S&P 500 ETFs like Vanguard S&P 500 ETF VOO, iShares Core S&P 500 ETF (IVV) and SPDR S&P 500 ETF Trust SPY. SPDR Portfolio S&P 500 High Dividend ETF Fund SPYD is a good bet for the dividend plays of the index. SPYD yields 4.72% annually.


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SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Vanguard S&P 500 ETF (VOO): ETF Research Reports
 
SPDR Portfolio S&P 500 High Dividend ETF (SPYD): ETF Research Reports
 
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