The S&P 500 Index and the ETFs like VOO and SPY retreated on Thursday as geopolitical risks continued after President Donald Trump’s speech. It dropped to $6,530, down by 6.75% from its highest point this year. So, will the VOO and SPY stocks rebound in April?
US-Iran War is the Biggest S&P 500 Index Risk
The VOO and SPY stocks are under pressure as the US-Iran war continues. In a statement on Wednesday, Trump said that his goal is to end the operation in the next two weeks.
The challenge, however, is that Iran is in no hurry to end the war as it seeks to boost crude oil and natural gas prices.
Also, there is a risk that Trump is preparing a land operation, possibly to take Kharg Island or to retrieve the enriched uranium. Such a move would likely escalate the war and push oil prices higher at a time when the US economy is dealing with stagflation.
The other risk is the ongoing jitters in the private credit industry. Most companies in the industry, like KKR, Apollo, and Ares tumbled today after Blue Owl announced that it would limit redemptions from two of its private credit funds.
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VOO and SPY Stocks Have Bullish Catalysts
Still, on the positive side, there are several reasons why the S&P 500 Index and its ETFs will eventually rebound. First, while the war may escalate in the coming weeks, chances are that it will eventually end. Such a move will lead to a strong rebound in the stock market.
Second, the Fear and Greed has tumbled to the extreme fear zone of 13, down from the previous month’s 34. It is common for the stock market to rebound whenever the index moves to the extreme fear zone.
Third, the ongoing stock market crash has made them bargains, with the S&P 500 Index having a forward price-to-earnings ratio of 19, its lowest level in years. The multiple has dropped from the year-to-date high of 23. For example, Micron stock has a forward PE ratio of 5, while NVIDIA has 19.
Additionally, and in line with the third point, the index has become a bargain despite the fact that analysts expect American companies to publish strong financial results when the earnings season starts later this month.
The average estimate is that earnings grew by 13% in the third quarter, the sixth consecutive one of double-digit gains.
Therefore, there are reasons to believe that the US stock market will bounce back in the coming weeks or months. Indeed, most Wall Street analysts have a bullish outlook for the S&P 500 Index this year, with Goldman Sachs, Morgan Stanley, and Bank of America predicting that it will end the year above $7,500, up from the current $6,590.
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