Where Will the Vanguard S&P 500 ETF Be in 1 Year?

• There are large tailwinds astatine play that person lifted the S&P 500 successful the past decade.

• The costly CAPE ratio contiguous mightiness bespeak little returns for investors going forward.

• It's hard to foretell what volition hap successful the adjacent 12 months, but it makes consciousness to person a tenable perspective.

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As its sanction suggests, the Vanguard S&P 500 ETF (NYSEMKT: VOO) gives investors vulnerability to the S&P 500 (SNPINDEX: ^GSPC). Owning this exchange-traded money (ETF) fundamentally means you'd beryllium betting connected the maturation of the U.S. economy, with a involvement successful 500 oregon truthful ample and profitable companies. It's a hassle-free approach.

In the past 12 months, this fashionable ETF ended up producing a full instrumentality of 17% (as of Jan. 16). Where volition the Vanguard S&P 500 ETF be successful 1 year?

Investors person nary complaints astir the show of the Vanguard S&P 500 ETF. In the past decade, it generated a full instrumentality of 337%, translating to an annualized summation of 15.9%. This above-average show is the effect of 3 large themes, successful my opinion.

The archetypal origin is simply a mostly favorable macroeconomic backdrop. Over the past decade, involvement rates person spent a batch of clip beneath 2%, a historically debased level that reduces borrowing costs, supports concern investment, and drives user spending. Furthermore, this tin assistance companies' gross and net power. The Federal Reserve is erstwhile again lowering involvement rates and embarking connected quantitative easing.

Stock marketplace gains person benefited from the emergence of the tech assemblage overall. Companies wrong the "Magnificent Seven" connection globally adopted products and services and person beardown growth, web effects, and immense escaped currency flows. And they person travel to predominate assorted industries, benefiting shareholders and representing a bigger stock of the wide banal market.

I judge passive investing mightiness beryllium the astir underrated origin of these three. At the extremity of 2023, wealth successful passive funds exceeded wealth successful progressive funds for the archetypal clip ever.

This monolithic inclination introduces a batch of superior to the banal marketplace that mightiness not person had entree to it before. Thanks to the proliferation of fee-free brokerage accounts, having vulnerability to the banal marketplace is frictionless. That adds buying powerfulness to equities.

After the Vanguard S&P 500 ETF's awesome winning streak, marketplace participants are acrophobic that the valuation is stretched. According to the CAPE ratio, a intimately watched metric that looks astatine the existent S&P 500 level comparative to trailing-10-year inflation-adjusted earnings, the S&P 500 is highly costly today. The CAPE ratio is presently 40.8. It has ne'er been this costly passim its full history, but for the play of the dot-com bubble successful 1999 and 2000.