Business Environment Profiles - United States
Published: 18 June 2025
S&P 500
6433 Index
11.4 %
The Standard & Poor's 500 stock index (S&P 500) is a commonly cited indicator of stock market performance. It is a scaled average of 500 large-capitalization common stocks in the United States. The companies included in the index operate in various sectors across the economy, including energy, finance, telecommunications, retail and manufacturing. The values presented in this report are the December 31 close figures. Data is sourced from the St. Louis Federal Reserve.
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The S&P 500 index grew an annualized 7.2% annualized during the boom period from 2003 through 2007, prior to the global financial crisis. The first signs of instability began in the first half of 2007, as investor confidence was jarred by revelations regarding the state of the subprime mortgage market. The S&P 500 experienced some large drops during this period but quickly bounced back. However, after reaching a new peak in October 2007, the market began slowing down as the full extent of the asset bubble revealed itself. The bursting of the bubble set off a slide in the US economy, which subsequently entered a recession.
The tipping point in the global financial crisis for the US stock market occurred on September 15, 2008, when Lehman Brothers filed for Chapter 11 bankruptcy protection. The collapse of such a massive financial institution shocked investor confidence regarding the future of other financial institutions, as well as the broader economy. As a result, the index fell 38.5% in 2008. Investors feared that the government would let the occasional bank fail to limit the moral hazard of bailing out such institutions, and pulled out of stocks that were previously considered to be safe. As other banks started heading for bankruptcy, the US government implemented a series of bailouts culminating in the $700.0 billion Troubled Asset Relief Program (TARP). The most significant bailouts included those of Bear Sterns, Freddie Mac, Fannie Mae and AIG. By containing the fallout of these collapses, the government restored investor confidence and spurred a rally in the S&P 500 starting in early 2009.
Since then, the stock market improved as the economy stabilized and investors have regained their appetite for risk. The S&P 500 has also received support from the monetary expansion enacted by the US Federal Reserve System in the form of large purchases of treasury assets. The effect of quantitative easing has been twofold: it has depressed yields on very safe assets, shifting demand toward stocks, and it has raised inflation expectations, which increases the nominal value of the companies included in the index.
Meanwhile, volatility has been persistently high. After declining again in the second quarter of 2010, the S&P 500 returned to steady growth. However, the index declined again during the third quarter of 2011 due to a debt ceiling crisis in the US and concerns about the state of the European economy. As the United States economy recovered between 2012 and 2014, the index grew. However, the S&P 500 index fell by 0.7% in 2015. After a year of significant global political uncertainty in 2016, the index rebounded with substantial growth of 19.4% in 2017. However, the S&P 500 experienced a steep decline at the end of 2018 amid an uncertain economic backdrop and rising geopolitical tensions. During the first quarter of 2019, the S&P 500 experienced an uptick as equity markets rebounded from the low at the end of 2018. New sources of optimism, including easing geopolitical tensions and central banks becoming more accommodative amid dovish shifts in monetary policy, led the index to increase 13.6% during the quarter. As a result, the S&P 500 has reached new record highs during the period, marking the longest bull market in history.
However, in early 2020, the spread of COVID-19 (coronavirus) pandemic, coupled with a steep decline in oil prices, saw a major sell off. The index has since recovered as global economies have reopened and governments have provided fiscal and monetary support. The index has also benefitted from the approval of coronavirus vaccines for public use, which has increased optimism for economic recovery. In addition, the passage of multiple fiscal stimulus bills has encouraged more bullish sentiment for equities. While vaccinations have been increasing, the delta variant has caused trepidation for investors in the stock market in the second quarter of 2021; nonetheless, the index has continued to climb amid strong corporate earnings.
Though investor sentiment remained strong moving into 2022, monetary tightening policy from the Federal Reserve took effect during March, which reduced substantial accommodations experienced during the pandemic. The policy shift includes the Federal Reserve aggressively raising interest rates through 2022 and selling off securities to lower the money supply. The Russian invasion of Ukraine also injected additional volatility into the supply chain, further disrupting companies in index ability to meet their forecasted results. As a result, valuations across asset classes plummeted during the year and pressure amplified on firms which were struggling to regain pre-pandemic performance.
The Federal Reserve's continued aggressive stance ultimately led the S&P 500 to fall 19.4% in 2022. Despite continued inflation and high interest rate pressures however, the S&P 500 has rebounded during 2023, with tech stocks being supported by artificial intelligence optimism and many within the market no longer expecting a significant cooldown of the US economy. As a result, the S&P 500 increased 24.2%, rebounding from lows experienced during the end of 2022. Despite continually high interest rates, the S&P 500 reached record levels during 2024, rising 23.3%. Though a slight increase in unemployment, combined with delayed interest rate cuts, led to some uncertainty and sell offs during the year, eventual rate cuts during Q3 has contributed towards significant growth.
In 2025, growth initially decelerated following the announcement of reciprocal tariffs in April. However, following tariff pauses and trade deals, the S&P 500 rallied and is forecast to reach an index value of 6,433.2 to close out the year, aided by the Trump Administration's tax cuts.
Over the five years to 2030, the S&P 500 is expected to be affected by various trends and uncerta...
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