S&P500 (SPY) : End of the correction?

SPDR S&P 500 (SPY) - 12/03/2018

Short Term strategy : Positive (90%) / Trend +
Long Term strategy : Positive (95%) / Trend -

Characteristics of the ETF

The SPY ETF (SPDR) created in 01/1993 replicates the S & P 500 index, which is composed of the 500 main US stocks representative of the main sectors, while the stocks are selected according to the size of their market capitalization.

The ETF fees are quite low at 0.0945% and the AUM is $ 213bn. Replication is direct (physical) and there is a dividend distribution policy on a quarterly basis.

Alternative ETFS: AUM5 (Amundi in Euro), SP5 (Lyxor in Euro), IVV (iShares, in USD)


Latest developments

After an increase of 19.4% in 2017, and a strong rise in January (+ 5.6%), the S&P500 suffered a sharp correction phase in February, but the strong rebound at the beginning of March led to a rise of + 4.2% since the beginning of the year.

The situation of the index is therefore more chaotic, and volatility has returned but the underlying trend remains bullish.

Fears of a return to inflation and long-term interest rates that have stretched to 2.95% remain active, but the monthly employment report for February reassured markets both in terms of inflation and on the dynamism of the US economy which is at the origin of the rebound.  new front has been opened on protectionism, but the congress and the various US lobbies have obtained concessions on the application of these measures and seem able to restrict the president's capacity for action. The other satisfying news, which provoked a rebound in Asian markets this week is the US's diplomatic acceleration with North Korea, which reassures geopolitically.


Index & components

The top 10 stocks of the S & P500 include five major technology stocks (Apple, Amazon, Microsoft, Alphabet and Facebook), but also larger, more classic and iconic American companies such as JP Morgan or Exxon Mobil.

The main advantage of this index is its depth, which allows it to be a good proxy for the US economy, with a sector weighting that favors the growth sectors a little more, just like the technology stocks that represent about 25% of the weighting. Financials account for just under 15% of the index, and energy values ​​of 6% are well balanced by defensive sectors such as health (about 14%) and consumer discretionary (13%). 

The index has benefited from a strong momentum since the election of D. Trump, more than a year ago, while alongside the technology that remains the engine of the US market, new sectors have joined the trend, however a correction is now underway on the index because of fears of a return of inflation following the program of lower taxes for US businesses and households that should have a positive impact on growth, while announced deregulation on shale oil and banks could also benefit these sectors.

However the multiples of the S & P 500 are currently quite high, even after the ongoing correction at around 19x the results at 12 months, which is at the top of range (historically between 15 and 20x) even if it must be put in American economy growth estimated at around 3% in 2018. The whole question is now about the duration of the US cycle in a context of rising rates which is still progressive for the moment while the level of margins companies is at its highest level and seems to have lost much upside potential, even though the consensus is again on double-digit earnings growth in 2018 driven by the energy / oil sector, banks and technological values.


Weekly data

The weekly chart shows a bullish engulfing figure that is clearly boosting the medium-term uptrend, and could open the road for new highs in the coming weeks. Oscillators are beginning to turn upwards, but this remains to be confirmed. After several weeks of hesitation, rich in events, the index seems to have chosen its camp at least in the short term.

Daily data

On the daily chart, the technical situation shows an index that has just crossed the main obstacle to its progression, by frankly breaking the bearish line that sign the end of the correction on the US benchmark and recovery of the short term trend. The prices should quickly get rid of immediate resistance at 2790 pts and go test new highs.

ETF Objective

SPY is an ETF in $ which seeks to replicate the S&P500 index (506 US companies)


Inception date 22/01/1993
Expense ratio 0.09%
Benchmark S&P 500
Issuer SPDR
Ticker SPY
ISIN US78462F1030
Currency $
Exchange NYSE Arca
Assets Under Management 273 017 M$
Replication method Direct (Physical)
Dividend distribution
Currency risk No
Number of holdings 506
Risk 3/5

Country Breakdown

USA 100%

Sector Breakdown

Information technology 25%
Financials 15%
Health Care 14%
Consumer discretionary 13%
Industrials 10%
Consumer staples 8%
Energy 5%
Others 10%

Top Ten Holdings

Apple 4%
Microsoft Corp 3%
Alphabet 3%
Amazon 3%
Facebook 2%
JPMorgan Chase 2%
Berkshire Hathaway 2%
Johnson & Johnson 2%
Exxon Mobil 1%