S&P 500 Forecast & Predictions for 2020, 2025 & 2030

October 21, 2020
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When it comes to approaching the stock market, there are so many different options across so many different countries, and of course with so many different publicly listed companies. This can be quite intimidating and difficult to follow as certain companies can be affected differently, but there are other options which are seen as much safer bets. 

Many traders like to look at major stock indices when they come to trading as the idea of an index is that it groups some of the bigger, better, and more well-performing together so that their gains are spread across, and their losses are mitigated somewhat. 

One of the most popular stock exchange indexes is the S&P 500. This is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices, and many consider it to be one of the best representations of the U.S. stock market.

Because of this, the S&P 500 is often followed to determine the health of the stock markets in the USA, but globally as well seeing as many of the companies in the 500 have a strong influence over the global markets. The reason why this index is such a powerful one is that the companies involved have a huge sway on the market, but it is usually in an upward trend, which is positive for investors. 

As of March 13, 2020, the S&P 500 has an average 10-year annual return of 7.99% which makes it a reliable investment for gains, but it is also prone to different movements and sways thanks to a variety of factors, and forecasting its movements can help investors cash in a lot of money. 



S&P 500 Forecast: For 2020 And Beyond

2020 is always going to be an interesting year across the entire trading space because of the unprecedented impact of the Coronavirus which has had a massive impact on the entire globe, from the markets to the economy, to the health sector and even the public liberties of almost every country. 

But, it is also worth looking into where the S&P 500 was coming into the year, and how that set it up to handle the market uncertainty that came about in the middle of March, because this paints an interesting picture of what the rest of 2020 may look like, and in fact what the future holds as this year will more than likely be a defining one. 

Towards the end of 2019, the S&P 500 and other major american stock indices stayed on track to post their best calendar-year performances since 2013, with the Dow up 21%, the S&P 500 27% and the Nasdaq nearly 33%.

This was all in the wake of threats between the US and China who were initiating a trade war. The stock markets coming into 2020 were reaching new heights and were catching praise from people as high up as the president of the USA, Donald Trump. 

But, in 2020, things took a turn, and it may have been a fall waiting to happen as these new heights and the acceleration to new highs often leads to falls as it is unsustainable to always be going up. 

The fall induced from the Covid-19 pandemic took the S&P 500 level to a level that has not been seen since late 2016, but, falls like this are not always the worst thing as they offer opportunities to get into the market that is set to climb again, and that is evident in how the market is currently moving. 

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S&P 500 Historical Overview

The S&P 500 has become a popular investing index since its initiation in 1957. It was introduced by Standard & Poor’s in 1957 as a stock market index to track the value of 500 large corporations listed on the New York Stock Exchange (NYSE) and the NASDAQ Composite.

WHat the history of this index shows is that because it is somewhat of a representation of the health of the American economy and space, it is often influenced by factors that affect the entire country. For example, during its first 10 years, the value of the index rose to nearly 700 points, reflecting the economic boom that followed World War II.

But, from 1969 to early 1981, the index gradually declined where it fell to a point under 300 with the US economy struggling with stagnant growth and high inflation. 

So, this index really is a bit of a bellwether of the US economy and this is important to note because when things are going well for America, the index will be higher, but if the opposite happens, things can go the other way. 

The index opened at 386.36 points and as explained it has risen to over 700 points after the war, and slumped back down again in economic stagnation. But, from 1982 to 2000, stock market prices rose and the S&P 500 climbed 1,350%. The factors that contributed to the rise in stock prices were things like interest rates trending lower, strong global economic growth as a result of increasing levels of globalization, a rise in the middle class, technological innovations, a stable political climate, and falling commodity prices.

Current S&P 500 Index 

If we look at the current situation of the S&P 500, we can see a really interesting graph over the last six months. Looking below we can see the high rising index climbing to impressive heights, but the quick fall is directly related to the impact of Covid-19, then a massive rebound to new highs afterward.

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When news started spreading that the Coivd-19 pandemic was spreading across the globe and would certainly have a major effect on the global economy, and the USA especially with its higher numbers of cases, the markets quickly reacted. 

In the matter of a few days the index fell to levels last seen in October 2016 as the notion of this index being a barometer of the health of the US economy came to be. Factors such as high elves of unemployment applications and quantitative easing proved the economy was in trouble and the markets reacted. 

However, the market eventually recovered to set new all-time highs on the heels of stimulus money pumping markets.

Top Factors That Impact S&P 500 In 2020 & In Future

It is probably a good time to delve deeper into the factors that have been known to influence the S&P 500 as we have come to the understanding that what is bad for the US economy is bad for the index, but there is a lot more to it than that. 

The stock markets are easily influenced by negative and positive news as these impact the companies involved in the market and their possibility of being profitable. So, there are three key factors in just the last year or so that have made major impacts on the charts.

The Federal Reserve, which is the department that controls the money, and basically the economy, can have a huge role to play in the way the stock markets move. Through 2019, the Fed started taking a patient, dovish stance, which meant that interest rates were halted, then lowered. 

Then, this was taken a step further with the Covid-19 panic as the Fed started printing more money and slashed interest rates again. With rates on the low, credit card borrowing rates will stabilize, and flat mortgage rates will be welcome for buyers.

 Lower rates are known to make stocks more attractive as investments because of the opportunity cost of owning fixed income assets. This in turn could be a major boost for the S&P 500 index in the coming months as the Fed looks to stimulate the ailing economy. 

The China v USA Trade war is another major factor that has played its part in moving the charts on the S&P 500. When things were looking bad in the trade war and the US economy was gearing up for a difficult path with a poor trade agreement with the second-largest economy, the stock markets were fearful. But the debating has flowed back and forth, and so has the stock markets. 

Even the impact of a major turn in Europe as the Brexit agreement between Britain and Europe played its part too. This overseas impact has a role to play in many of the 500 companies in the index so when there was so much uncertainty around Brexit, there was not much room for many of these companies to make any positive moves. 

But, now that Brexit has been pushed through and agreed upon, it opened the gates for many companies to start moving, even if it was not the result they wanted. The certainty of Brexit at least allowed steps to be taken.

As explained, in the past, economic booms following World War II and even economic stagnation in the 70s and 80s had their parts to play with the growth and decline of the stock markets and the S&P 500 especially. 

S&P 500 Forecast 2020

It is unsurprising that the S&P 500 prediction set for 2020 towards the end of 2019, when the stock markets and the S&P 500 especially, where on the rise ,have since been downgraded quite heavily because of the black swan event that is the Covid-19 induced market panic. 

2020 has seen the reversal of a bear market and a steep drop to levels seen last in 2016, and because the S&P 500 is a measure of the health of the US economy, it is well known now that the economy across the globe is going to be heavily affected in the next year or so. 

To put this into context, Bank of America has lowered its year-end target for the S&P 500 to the lowest on Wall Street amid the coronavirus pandemic. The bank’s 2020 S&P 500 target is now 2,600, a 16% cut from the previous estimate of 3,100. As of right now, however, the S&P 500 remains over 3400 after the summer recovery into the autumn months.

“Our economists now forecast the deepest recession in the post-war era, and health care experts have extended the timeline for social distancing,” quant strategist Savita Subramanian.  wrote. “We incorporate these elements, as well as what the world might look like post-COVID 19 into our market outlook.”

Credit Suisse analyst Jonathan Golub also was another to cut the early 2020 predictions as the coronavirus outbreak remains a near-term hindrance on corporate growth prospects. But for 2021, stocks are going back up, he said.

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What the above graph shows is how the different sectors, of which companies in the S&P 500 are mostly made of, are already recovering from the Covid-19 impact. The dip has been seen across the sectors, and it has been seen in the markets, but for the rest of 2020 it is about how things can recover as there is already recovery in the different sectors as well as the market — but it is unlikely that 2020 will see much growth year on year from 2019.

Future S&P 500 Predictions

Looking beyond 2020, there is bound to be some real movements in the stock markets and the S&P 500 as this collapse seen in March means that the only way is really up. The fall in the S&P 500 was directly correlated to the expected impact on the economy, and while the impact will still be felt through 2020, it will be a few years of recovery and how the markets can bounce back. 

S&P Predictions For Next 5 Years (Until 2025)

As mentioned above, the black swan event that has smashed the global economy and the markets is likely to be a floor in which the markets can recover from. But that being said, the future of the impact from this Covid-19 impact is likely to be felt for some time to come. 

Some S&P 500 forecasts see the points mostly falling by a few percent through most of 2020, but towards the end of the year things could start reversing and the positive rebound could begin, and should be heading up from 2021.

It is forecast that in January 2021, the S&P 500 could cross to over 3,000 points and it should stay in that lower 3,000 range until about September which could help the index cross to over 3,400 points. 

Once the index has made such gains, it is forecast that the momentum from the rebound after the Covid-19 panic will start to slow and the index should plateau a little bit and sit in a range between 3,300 and 3,600 until after 2022.

But, by the time 2024 and 2025 comes around that plateau is more than likely to have been broken and a new set of acceleration could push the index above the all important mark of 4,000 points by 2025. 

S&P 500 10 Years Forecast (Until 2030)

Looking even longer, the S&P 500 as a measure of economic health and well being should be well past the damage caused by the covid-19 recession, and in fact, should be topping a new high before the next possible recession which often comes in 12 year cycles. 

But, Bank of America analyst Savita Subramanian has said the S&P 500’s current valuation coupled with plummeting earnings outlooks for 2020 suggests the S&P 500 may limp its way through the 2020s, but there will still be sustainable growth.

“Based on regressions, today’s valuations suggest S&P 500 annualized 10-yr price returns of 4%-5%,” Subramanian said.

Since 1947, the S&P 500 has produced roughly 8% annual gains, suggesting the current environment may be a historically bad entry point for investors. In terms of a price target, Bank of America is targeting S&P 500 4,100 to 4,500 by 2030, between 47% and 61% overall upside over the next 10 years.


What determines S&p 500?

The S&P 500, while not a direct reflection of the health of the US economy, has a big correlation to what is happening with the economy as it covers the top 500 companies in the US and their effectiveness is based on the economy. 

How often do S&P 500 companies change?

There is no predetermined time for the companies in the S&P 500 to change, but rather there are ongoing changes as companies drop out and then replace them. This is also happening more often than in years past. 

Why is the S&P 500 so important?

The S&P 500 is both popular and important as it takes the best companies that an investor can look at investing in and out them in one place. This is easy for investors to invest in successful companies, and the success of the S&P 500 is indicative of the success of big business in the country.

Can you buy S&P 500?

The S&P 500 is not an actual stock that one can invest in, rather it is an index that the investment is made. Instead of purchasing 500+ separate stocks (which are ever-changing anyhow), it’s an opportunity to invest in a single fund.

Does the S&P 500 pay dividends?

The S&P 500 index tracks stocks, many of which pay out a regular dividend. The dividend yield of the index is the amount of total dividends earned in a year divided by the price of the index. Historical dividend yields for the S&P 500 have typically ranged from between 3% to 5%.



Summary: What is the future of the S&P 500

While things seen relatively poor for the S%P 500as things stand because both the markets and the economy are in a position that is not very fruitful for growth, there is a positive side to it. The drop seen in the market correlates to the impact on the economy, but the pandemic is already showing signs of letting up and recovering and this will mean a return to strength for the S&P 500. 

The knowledge that the economy, and the markets, will recover is almost universally felt, the time it takes and how well it recovers is another thing, but for many traders this represents a perfect time to enter the market and take advantage of the probable upswing in the coming months, if not years. 

In order to take advantage of the lows that the market are currently going through and the expected return to new highs after the pandemic, it is a good time to find a platform that offers you the chance to trade the S&P 500 — such as PrimeXBT: you can sign up here




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