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After the S&P 500 tumbled sharply so far in 2022, SPDR S&P 500 ETF Trust (NYSEArca: SPY) stock is looking much more attractive than it was six months ago and a year ago. And, as a result of upcoming, positive macro drivers, I do expect the ETF to climb significantly in the near term, medium term and long term.
Still, for every conservative investors, I continue to recommend buying more targeted ETFs than SPY stock.
Improved Valuation and Upcoming Positive Drivers
The S&P 500’s price-earnings ratio is now 20.97, down from 23 at the beginning of 2022 and 28 a year ago. So, after many of the S&P’s biggest names, including Meta (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX), took big hits, the valuation of SPY stock has become much more enticing.
What’s more? I expect the index to get a big lift after the Federal Reserve reports the results of its meeting on May 4. With many economists saying that inflation looks to be peaking and the situations in China and Russia still uncertain, I very much doubt whether the central bank will be more hawkish than the market expects. Therefore, I expect the S&P to benefit from a meaningful relief rally starting on Wednesday.
And over the medium term, I expect the Fed to be more dovish than many expect. The Fed’s decision to tolerate surging inflation for a long time before raising rates indicates that it’s willing to accept annual inflation 3%-4%. Meanwhile, supply-chain improvements should cause price increases to decelerate.
Finally, over the long term, I believe that Wall Street is currently underestimating the extent to which consumers, helped by a very strong labor market and much higher home values, will keep spending prolifically.
Other ETFs Look More Attractive for Most Investors
There are several trends that are clearly becoming quite strong, and risk-tolerant investors should look to exploit them by buying thematic ETFs. For example, with Europe using solar energy to avoid utilizing Russian gas, the Invesco Solar ETF (NYSEArca: TAN) looks like a very good play at this point. And worries about cybersecurity attacks by Russia make the ETFMG Prime Cyber Security ETF (NYSEArca: HACK) very attractive.
Finally, the airlines’ recent strength, amid the travel boom, makes the U.S. Global Jets ETF (NYSEArca: JETS) a very good choice, while the Global X Lithium & Battery Tech ETF (NYSEArca: LIT) should get a big lift from the electric-vehicle revolution.
Still, buying SPY stock is not a bad choice at this point for conservative investors who don’t want to take a chance on a single sector suddenly being hit with major challenges.
On the date of publication, Larry Ramer was long LIT stock.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.