The S&P 500 (SPX) is one of the most closely watched indices globally, serving as a barometer for the US stock market’s health and, by extension, the broader economy.
For 2025, the SPX has exhibited a year-to-date increase of about 3.25% at the time of writing, showcasing resilience amidst various economic fluctuations.
This article will delve into the performance of the SPX so far, explore investment options for Zimbabwean investors via ETFs, and discuss the inherent risks and opportunities.
Performance overview of the S&P 500 in 2025
The year began with the SPX reaching new highs, buoyed by optimism around AI growth, anticipated deregulation under the Trump administration, and expectations of continued low interest rates. However, the index has not been without its challenges. Here are some notable drops:
Early January dip: After hitting a peak, the SPX experienced a brief but sharp correction in early January, dropping by approximately 4% over two trading sessions. This was largely attributed to profit-taking after a strong start to the year and some uncertainties regarding the new administration’s policies.
Mid-January volatility: Around mid-January, the index saw another dip of about 3% due to rising US Treasury yields and concerns over potential inflation spikes from proposed tariff policies by the incoming administration.
Recent correction: Just this week, the SPX edged slightly lower as investors recalibrated their expectations around Federal Reserve (Fed) policies, with US Treasury yields staying elevated. This correction was relatively mild at around 1.5%, reflecting cautious optimism rather than panic. On January 27, the SPX dropped 1.46 owing to the rising consent of Deepseek AI buzz which investors thought might disrupt other US AI models that have been more expensive to develop.
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Despite these dips, the overall trend has been upward, supported by robust corporate earnings, particularly in tech and healthcare sectors, and a generally resilient U.S. global economy.
Investing in the S&P 500 from Zimbabwe
For Zimbabwean investors interested in gaining exposure to the US market through the SPX, Exchange-Traded Funds (ETFs) offer an accessible route:
Vanguard S&P 500 ETF (VOO): Known for its low expense ratio, this ETF mirrors the performance of the SPX, providing broad market exposure. It’s particularly appealing due to its dividend reinvestment option which enhances compounding over time.
iShares Core S&P 500 ETF (IVV): Another cost-effective option, IVV closely tracks the SPX with significant trading volumes, ensuring liquidity for investors.
SPDR S&P 500 ETF Trust (SPY): The largest and most liquid ETF tracking the SPX, offering flexibility for those looking to trade actively on US market hours. In full disclaimer, I own some shares for this and this is not a recommendation for the product.
Specialised ETFs: For those seeking different strategies, there are ETFs like the SPDR Portfolio S&P 500 Growth ETF (SPYG) for growth stocks or SPDR Portfolio S&P 500 Value ETF (SPYV) for value stocks within the index.
To invest, Zimbabwean investors would typically:
Open an international brokerage account: I use my Canadian broker that allows for international trading, including U.S. ETFs. However, a broker is just a vehicle that enables an investor to buy shares.
Convert currency: Convert ZiG (Zimbabwe Gold) to US dollars, which might involve dealing with forex volatility. Some of my past clients from Zimbabwe open International accounts which allows them to deposit US dollar which they can then trade or invest offshore.
Purchase ETFs: Through their brokerage, buy shares in the chosen S&P 500 ETF.
Risks and opportunities
Risks:
Currency Risk: The ZiG’s volatility against the USD can affect returns when converting profits back to local currency.
Geopolitical and policy risks: Changes in U.S. policy, especially concerning trade, could impact the SPX negatively.
Market volatility: The SPX’s recent drops highlight the inherent unpredictability of stock markets.
Interest rate movements: With the Fed’s decisions potentially affecting borrowing costs, sectors sensitive to interest rates could see fluctuations. On January 29, the Federal Open Market Committee will meet to make a rate decision.
Opportunities:
Diversification: Investing in the SPX offers exposure to a wide range of US industries, reducing sector-specific risks.
Growth potential: The US economy’s projected growth and the tech sector’s expansion provide significant upside. Over the past 30+ years, it has averaged over 10% annually excluding dividends.
Dividend yeld: Many companies within the SPX pay dividends, offering a passive income stream. Most ETFs that track the SPX pay dividends, which can provide a passive income source though one needs to have a significant share number to have meaningful dividends.
