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 U.S. 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.
Specialized 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. OnJanuary 29, the Federal Open Market Committee (FOMC ) 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..
AI and innovation: The ongoing AI revolution continues to be a tailwind for many companies in the index.
This week's economic data and fed decision
Investors should note the upcoming economic data releases expected this week, including:
Jobless Claims: A key indicator of employment health, which has shown resilience with claims at 201,000 last report. Latest job numbers will be released on January 30.
Inflation data: The annual inflation rate for the United States was 2.9% for the 12 months ending December, compared to the previous rate increase of 2.7%, according to the U.S. Labor Department data published on January 15, 2025., This will potentially influence Fed policy.
The Federal Reserve decision: Scheduled for Wednesday, markets don't see another Fed rate cut as likely until the June 18 meeting, when Wall Street is pricing in 61%-39% odds in favor of a rate cut, according to CME Group's FedWatch tool. Odds of a rate cut stand at just 3% for the Jan. 29 Fed meeting, 24% for March 19 and 39% for the May 7 meeting.
These factors could sway the SPX in either direction, providing both opportunities for buying at lower prices if there's a dip or potential for gains if positive data is released.
The S&P 500's performance in 2025 has been a mix of growth and volatility, offering both opportunities and challenges for investors from Zimbabwe.
By understanding how to access this market through ETFs, and being aware of the associated risks and opportunities, Zimbabwean investors can potentially benefit from one of the world's leading economic indicators, but they must remain vigilant to both global economic signals and local market conditions.
This week's economic data and the Fed's decision will be crucial in shaping short-term investment strategies in the SPX.
*Isaac Jonas is a Canadian based economist and principal consultant at Streetwise Economics. He is also a retail investor, retail trader and content creator, focusing mainly on the US and Canadian capital markets. He regularly shares insights via his social media handles and YouTube Channel (Streetwise Economics). His website is www.streetwiseeconomics.com and can be reachable on isacjonasi@gmail.com. Insights shared in this article are based on current market conditions which may be subject to change without notice, hence this article does not amount to investment advice.
