A prominent Wall Street advisor has projected that the S&P 500 index could potentially reach 15,000 by 2030.
Warren Buffett has been the CEO of Berkshire Hathaway since 1965. He manages a portfolio consisting of 45 publicly traded stocks and securities valued at $316 billion, in addition to a $277 billion reserve in cash and several private, wholly owned businesses.
Under Buffett’s guidance, Berkshire’s stock has consistently delivered a compound annual return of 19.8% over the past 59 years, transforming an investment of $1,000 into over $42 million.
Recognizing his own expertise in stock selection, Buffett advises average investors, who may find it challenging to mirror his returns, to invest in exchange-traded funds (ETFs) focusing on indices like the S&P 500. Indeed, Berkshire’s portfolio includes two S&P 500 index funds: the Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF Trust (SPY). A top Wall Street analyst predicts that the S&P 500 could rise to 15,000 by 2030, potentially resulting in a return of 158% for these index funds.
The S&P 500 includes 500 companies from 11 different sectors of the U.S. economy, making it highly diversified. The criteria for entry are stringent, limiting inclusion to the highest-quality companies, which must be valued at least $18 billion and profitable over the recent four quarters. Admission is determined by a specialized committee that rebalances the index quarterly.
The S&P 500 is weighted by market capitalization, meaning larger companies have a more significant impact on its performance. As of recent data, the technology sector constitutes 32.2% of the index due to its inclusion of America’s six trillion-dollar companies. The top five holdings in the S&P 500, Apple, Nvidia, Microsoft, Amazon, and Meta Platforms, are developing artificial intelligence in various capacities, a burgeoning industry likely to continue propelling the index’s growth.
When comparing Vanguard ETF and SPDR ETF, both track the S&P 500, therefore offering similar returns. However, the Vanguard ETF has a slight advantage with a lower expense ratio of 0.03% compared to the SPDR ETF’s 0.0945%, allowing it to align more closely with the S&P 500’s performance after fees.
Tom Lee from Fundstrat Global Advisors has made some accurate predictions about the S&P 500 in recent years. Lee forecasts it could reach 15,000 by 2030, suggesting a potential 158% upside, which would benefit investors in Vanguard and SPDR ETFs if the prediction holds.
Lee believes the S&P 500 will be positively impacted by demographic trends, as millennials and Gen Zers enter their peak earning years. He also points to AI as a catalyst for market growth, citing a potential global worker shortage by 2030.
For the index to reach 15,000, it would need to grow at an annual rate of 16.6% over six years—a slightly higher rate than its long-term average. If trends such as AI continue to dominate as they have, Lee’s prediction may be realized. Regardless, historical trends indicate that the S&P 500 is likely to eventually reach that milestone, making it a prudent investment choice, as Warren Buffett advocates.
Randi Zuckerberg and John Mackey, both linked to companies mentioned, are members of The Motley Fool’s board of directors. Anthony Di Pizio holds no positions in the stocks mentioned, and The Motley Fool has stakes in several of the companies discussed, including Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETF.