Guide to S&P 500 ETF Investing

The S&P 500 is undergoing a rough phase in 2025 due to aggressive U.S. tariff policies and occasional ups and downs in Big Tech stocks. However, after enduring a sharp downturn in early April due to a heightened trade war saga, the S&P 500 has finally staged a remarkable comeback in May.

The index has gained 12.8% past month and 5.3% past week. Optimism surrounding a temporary U.S.-China trade truce and cooling inflation contributed to the market's upward momentum. These gains helped the index turn green in the year-to-date period. The index is up 1.3% so far this year and has gained 12.4% over the past year.

Was the Latest Correction Healthy?

While tariff fears were blamed for the recent selloff, the market was likely due for a pullback after a strong run late last year and into early 2025. Either way, it presented a buying opportunity—just like most pullbacks and corrections do.

While declines are painful, they’re normal in bull markets—and often set the stage for strong recoveries. Every bear market in history has led to a new bull market.

Recent examples prove the upside potential:

• After the 2020 bear market, the S&P 500 has surged 74.9% in just a year.
• From the 2022 lows, it gained 22.4% in 12 months, 62.6% in 24 months and 71.8% by February 2025.

Wall Street Ups Forecasts as Trade Tensions Ease

Investment banks are turning more optimistic on U.S. stocks following the 90-day U.S.-China tariff truce. Goldman Sachs raised its year-end S&P 500 target to 6,100 from 5,900 (same as BMO Capital), while Yardeni Research lifted its forecast to 6,500 from a previous call for 6,000, as quoted on Yahoo Finance. Morgan Stanley shares the same view as that of Yardeni.

The most bullish forecast comes from Wells Fargo, which predicts that the S&P 500 will close out 2025 at 7,007. Fundstrat predicts it at 6,600. Analysts cited stronger economic growth, fewer recession risks, and reduced tariff pressure as the key factors behind the upgrade.

Deutsche Bank, Citi and Bank of America expect it at 6,150, 5,800 and 5,600, respectively. The lowest forecast (i.e., target 5,200) came from J.P. Morgan, which still expects 50% recession risks. On the other hand, Barclays commented that the U.S. recession is no longer likely after the U.S.-China trade truce. Year-end S&P 500 target of Barclays is 5,900.

NVIDIA Surges Past $3 Trillion, Mega-Caps Climb

Tech giants led last week’s rally, with NVIDIA NVDA gaining nearly 11% to once again cross the $3 trillion market-capitalization threshold. The company benefited from renewed optimism in the AI and semiconductor space, fueled by positive trade developments and deals in the Middle East (read: NVIDIA Reclaims $3 Trillion: ETFs to Bet On).

Inflation Cools, But Fed Holds Steady

April’s Consumer Price Index (CPI) report revealed the lowest annual inflation rate since 2021, signaling no immediate price pressures despite earlier tariff volatility. However, economists noted that the data is unlikely to change the Federal Reserve’s cautious approach.

President Trump took to Truth Social to pressure the Federal Reserve for rate cuts, citing cooling inflation and lower consumer prices. The already-enacted base tariffs are likely to contribute to higher inflation ahead. Now, it remains to be seen how well consumers, corporations and the broader economy will handle inflation. The Fed is likely to move forward, guided by that trend.

S&P 500 Earnings Outlook

For 2025 Q2, total S&P 500 earnings are expected to be up 5.9% from the same period last year on 3.8% higher revenues. Q2 estimates have been steadily declining, with both magnitude and breadth of negative revisions exceeding those seen in similar periods in recent quarters, due to tariff tensions.

S&P 500 ETFs in Focus

Against this mixed backdrop, investors may track S&P 500 exchange-traded funds (ETFs) such as Vanguard S&P 500 ETF VOO, iShares Core S&P 500 ETF IVV, SPDR S&P 500 ETF Trust SPY and Invesco S&P 500 Momentum ETF SPMO. Investors can also play the growth part of the index with SPDR Portfolio S&P 500 Growth ETF SPYG and the value part of the index with SPDR Portfolio S&P 500 Value ETF SPYV. SPDR Portfolio S&P 500 High Dividend ETF Fund SPYD is a good bet for the dividend plays of the index.

Investors with a strong stomach for risk can bet on leveraged S&P 500 ETFs like Direxion Daily S&P 500 Bull 3X Shares SPXL, ProShares Ultra S&P500 SSO and ProShares UltraPro S&P500 UPRO if the index is on an uptrend.However, if the S&P 500 falls by any chance, inverse ETF ProShares Short S&P500 ETF SH will rise.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research