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When US President Donald Trump announced unexpected tariffs on ‘Liberation Day’ (2 April), the stock market (especially the S&P 500 and the Nasdaq indexes) went into freefall. For a few days, share prices were plummeting.
However, in recent weeks, we’ve seen a massive rebound as trade deals have been ironed out. Here’s a look at how much £10,000 invested in an S&P 500 ETF near the post-Liberation day market lows would be worth now.
An explosive rebound
One of the most popular S&P 500 ETFs in the UK is the iShares Core S&P 500 UCITS ETF USD (Acc) (LSE: CSPX). So, I’m going to use this product (which reinvests all dividends) as a proxy for these index funds.
On 7 April – when stocks were extremely volatile – the price of this ETF fell to around $520 (it also fell to this price on 9 April so investors had two opportunities to buy at this price). Given that the GBP/USD exchange rate was approximately 1.27 on 7 April, an investor could have snapped up 24 units in the ETF for £10,000 at that price (and had a little bit of cash left over after trading commissions).
Today, the price of this ETF is $627. Meanwhile, the GBP/USD exchange rate is about 1.33 (the rise in the pound would have been a drag on returns). This means that those 24 units would now be worth about £11,315. So, the investor would be sitting on a decent profit.
Overall, they’d be up a little over 13%, despite the fact that currency movements would have hurt returns (a risk when investing in USD-based products). Not a bad return in just over a month!
The best time to invest
Now, I have to admit that I wasn’t expecting this kind of quick rebound when stocks dropped after Liberation Day. Given the high level of economic uncertainty, I thought share prices may remain depressed for a while.
But I was investing in a few different index funds myself at the time. And it has paid off.
It has also reinforced my view that the best time to buy stocks is when major indexes are in freefall and investing feels really hard. Generally speaking, if we buy stocks when investing feels awful (you know, sickening), we’re usually rewarded sooner or later.
Worth it now?
Is the iShares Core S&P 500 UCITS ETF USD (Acc) worth considering today after such a fast rebound? I think so, assuming one has a long-term investment horizon.
That said, I wouldn’t go ‘all in’ on it today. Looking ahead, I wouldn’t be surprised to see further market weakness in the near term. In the coming months, economic data could be weak (due to the recent uncertainty), leading to volatility in the stock market at times.
Given the potential for volatility, I’d recommend drip feeding capital into the ETF bit by bit to manage risk. I also think it could be worth looking at individual stocks within the index (or other indexes), as there could be better investment opportunities within the market….
