The Vanguard S&P 500 index (VOO) has bounced back in the past two straight days as investors reflect on the recent statement by the Federal Reserve chair. The index has also jumped as investors wait for the start of the earnings season. The VOO stock price is trading at $430, which is about 120% above the lowest level in 2020.
Rotation from growth to value
The Vanguard S&P 500 index is one of the biggest ETFs that tracks the S&P 500 index. It has over $255 billion in assets and an expense ratio of 0.03%. It has more assets than the Invesco QQQ fund, which has over $208 billion in assets and an expense ratio of 0.20%.
The VOO stock price has done well this year as investors rotate from growth stocks to value stocks. Analysts cite this rotation to the fact that monetary policy will change in the coming months as the American consumer inflation jumps.
Last week, the Federal Reserve published minutes of the past monetary policy meeting. In that meeting, the bank warned that inflation was still rising and that it was no longer transitory.
In his confirmation hearings this week, the Fed chair reiterated that the bank will do whatever it takes to prevent runaway inflation. That involves ending the ongoing quantitative easing (QE) policy in March. He also said that the bank will start hiking interest rates later this year. Analysts expect that the bank will implement about three to four rate hikes this year.
Therefore, the Vanguard S&P 500 ETF has performed better than the QQQ because it is a more diversified fund. QQQ is mostly made up of high-growth stocks that are often seen as being riskier than the S&P 500. Some of the best performing sectors in the S&P 500 are energy and finance, which are underrepresented in the Nasdaq 100 index.
Earnings season incoming
The VOO stock price has also jumped as investors anticipate for the upcoming earnings season in the United States. The season will kick-off officially on Friday when banks like Wells Fargo, Citigroup, and JP Morgan will publish their results.
Analysts expect that companies will publish strong quarterly results. For example, recent flash numbers have been positive. Data by Mastercard showed that the holiday season was great while numbers by automakers showed that their deliveries were strong.
According to Factset, the estimated earnings growth for the S&P 500 index is 21.7%. If this estimate is accurate, it will mark the fourth straight quarter in which earnings growth has been above 20%.
Wall Street banks are expected to publish strong results because of the surge in dealmaking. This strength will likely offset a slowdown in earnings growth. Notably, these companies will likely issue a positive earnings guidance considering that the financial sector is doing well. For example, data shows that companies have raised over $100 billion in debt this year.
Next week, other companies in the VOO fund that will publish their earnings are Johnson & Johnson, Blackrock, Goldman Sachs, Morgan Stanley, and United Airlines among others.
VOO stock price forecast
The daily chart shows that the VOO stock price has been in a strong bullish trend. While the stock declined early this year, the losses were capped at the 50-day exponential moving averages (EMA) level. The stock is between the ascending channel shown in blue. Therefore, there is a likelihood that the S&P 500 fund will keep rising and retest its all-time high at $440.