2024 has been a great year for the S&P 500 Index (SP: .INX), with US-listed stocks, on average, outpacing their ASX share counterparts.
The S&P 500 has gained 28.1% year to date. That's more than twice the 10.5% gains posted by the S&P/ASX 200 Index (ASX: XJO) so far in 2024.
With interest rates in the United States already heading lower and Donald Trump's more corporate-friendly administration poised to take control on 20 January, a number of analysts are bullish on the outlook for the benchmark US index in the year ahead.
Among them is Christopher Harvey, head of equity strategy at Wells Fargo.
As The Australian Financial Review reports, Harvey is forecasting the S&P 500 will end 2025 at 7,007 points. That's 15.3% above Thursday's close of 6,075 points.
"On balance, we expect the Trump administration to usher in a macro environment that is increasingly favourable for stocks at a time when the Fed will be slowly reducing rates. In short, a backdrop where equities continue to rally," Harvey said.
We'll look at an ASX share that stands to benefit from a rising S&P 500 below.
But first, here's why Harvey is optimistic about the US stock market in the year ahead.
Why the S&P 500 could soar another 15% in 2025
Part of Harvey's bullish assessment for the S&P 500 in 2025 stems from Wells Fargo's revenue forecasts.
"Our 6% revenue growth assumption is slightly above the mid-5% consensus, as we expect: GDP growth to come in a little stronger than currently envisioned, and a slight late-2025 benefit from a pickup in M&A activity," he explained.
Of course, if the S&P 500 loses ground instead of charging ahead next year, the ASX share that would benefit from any gains will instead share in the losses.
But Harvey isn't overly concerned about the US stock market heading backwards next year, noting that "the data did not support a weak/negative year" for the S&P 500.
According to Harvey (quoted by The AFR):
What we typically see heading into a down year are either rather wide/widening credit spreads (associated with a recession/weak economy as in 2000, 2001, 2002, and 2008), or tight credit spreads but a Fed tightening cycle (2018). Currently, IG credit spreads are tight, and the Fed is in an easing cycle (1995, 2019).
The combination of tight credit spreads, low (about 2 per cent) GDP expectations, a Fed easing cycle, and a more business-friendly administration suggests 2025 is likely to be a solid-to-strong year.
An ASX share to mimic that performance
Returning to our headline thesis, if you're looking to tap into the S&P 500's forecast 15% gains in 2025 by investing in an ASX share, you may wish to run your slide rule over iShares S&P 500 ETF (ASX: IVV).
The exchange-traded fund (ETF) aims to track the performance of the S&P 500 — hence the name!
Year to date, as of Friday's market close, the ETF has delivered a return of 34.9%.
The ASX share currently holds 507 US-listed stocks, with the tech giants making up its biggest holdings.
IVV's top six current holdings are:
- Apple Inc (NASDAQ: AAPL)
- Nvidia Corporation (NASDAQ: NVDA)
- Microsoft Corp (NASDAQ: MSFT)
- com Inc (NASDAQ: AMZN)
- Meta Platforms Inc (NASDAQ: META)
- Alphabet Inc Class A(NASDAQ: GOOGL)
Rather than try to buy small portions of all these top US stocks on your own, this ASX ETF is one to consider.
