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There have been ups and downs, however over time America’s S&P 500 has proved itself a prime vacation spot for traders in search of large returns.
Since 2010, the share index has delivered a median annual return of just about 14%. Returns throughout this time have been supercharged by its massive contingent of high-growth tech shares like Nvidia, Microsoft and Tesla.
However doubts are creeping in as as to whether the S&P 500 can keep its report. This follows plans by US President Donald Trump to impose probably crushing commerce tariffs on main buying and selling companions.
What does this imply for traders?
Stark warning
Scanning the monetary pages this morning (17 February), I used to be drawn to an interview with Nobel prize-winning economist Joseph Stiglitz.
Discussing potential US tariffs and reciprocal taxes from commerce companions, he stated that “it dangers the worst of all attainable worlds: a sort of stagflation.”
Stiglitz stated that uncertainty associated to Trump’s commerce plans would gradual financial development, whereas new tariffs might additionally push up prices for enterprise and shoppers.
He commented that “how a lot it can improve costs is a bit of bit affected by the magnitude of the appreciation of the trade price, however all economists suppose that the extent of the appreciation of the trade price gained’t be wherever close to sufficient to compensate for the tariffs.“
Don’t panic but
Traders should be further cautious on this local weather. Nevertheless, I really feel there’s additionally no want for them to panic.
First, there’s no assure that new commerce guidelines will come into place. Trump’s choice to delay tariffs on Mexico and Canada final month signifies room for manoeuvre.
There’s one other essential factor to recollect. Whereas economists like Stiglitz deserve consideration, we’ve seen many occasions earlier than that predictions of doom and gloom will be overstated.
So, is the S&P 500 nonetheless a sexy place to contemplate investing? I feel so, which is why I plan to proceed holding US shares, trusts and funds.
Spreading threat
Whereas the outlook is extra unsure as we speak, there are nonetheless good causes to anticipate S&P shares to outperform over the long run. These embrace:
- The robustness of the US financial system.
- Additional fast development within the digital financial system that powers tech earnings.
- Dominance by S&P 500 corporations in main sectors like healthcare, finance and expertise.
- The S&P’s massive international footprint offering added earnings alternatives.
It’s additionally essential to recollect the robustness of the US inventory market over time. Since its inception in 1957, the S&P 500 has overcome a number of crises — together with wars, recessions, pandemics and political turmoil — and has hit new report highs in 2025 regardless of tariff worries.
Nevertheless, cautious traders could want to take into account shopping for an index-tracking exchange-traded fund (ETF) in addition to buying particular person shares as we speak. The HSBC S&P 500 ETF (LSE:HSPX) is one I maintain in my very own portfolio.
By investing in a whole bunch of various corporations, the fund helps traders handle a low-growth situation via holdings in cyclical and non-cyclical companies. It additionally consists of industries which can be much less susceptible to inflationary pressures, like shopper staples and healthcare.
Lastly, the fund limits publicity to sectors that may very well be instantly impacted to a big diploma by commerce tariffs, such because the automobile trade and agriculture.
This HSBC product isn’t resistant to financial volatility. However over the long run, I nonetheless consider it might proceed delivering glorious returns.
