The last couple of weeks have been quite rough for the S&P 500, with the flagship American index tumbling 10% and into correction territory. However, with investors seeking to buy on the dip, some areas of the US stock market have started showing early signs of recovery and improving sentiment.
Given how quickly policies are changing in the US, it’s difficult to pinpoint whether the recent uptick is the start of a recovery or a temporary lull in the storm. Regardless, if British investors were to put £5,000 to work inside the S&P 500 today, how much money would they have 12 months from now? Let’s explore.
What to expect
In the long run, I can say the S&P 500 is likely to rise. Despite all the recent disruptions, the American economy’s one of the strongest in the world, and this has subsequently generated impressive historical gains. Typically, US stocks move up by around 10% a year.
However, in the last decade, this rate of return has improved to around 14%. If we assume that this level of performance will repeat over the next 12 months, then a £5,000 investment today could grow to £5,700 by next March. But what do the professional forecasters think?
Looking at the latest projections by The Economy Forecast Agency, the S&P 500’s on track to hit anywhere between 6,232 and 7,170 points in March 2026. That’s a potential gain of 9.8-26.3%, translating into a £5k portfolio growing to anywhere between £5,490-£6,315.
Exploring options
Every forecast needs to be taken with a healthy pinch of salt. After all, they’re built on a series of assumptions that aren’t guaranteed to come true. In fact, in most cases, they rarely do. As such, it’s entirely possible that investing £5,000 today could yield lacklustre results, or even fall into the red if investor sentiment worsens over the next 12 months.
But even if these predictions prove accurate, that doesn’t mean every S&P 500 stock’s going to be a winner. Take Adobe (NASDAQ:ADBE) as an example. Since the recent correction started, the tech giant is down by double digits. But even before the recent market volatility, the shares have been tumbling, falling by over 30% since the start of 2024.
In a combination of rising fears of disruption from AI-powered rival products, an ongoing lawsuit by the Federal Trade Commission over alleged predatory software subscriptions, and lower-than-expected guidance, Adobe shares have lost a lot of love.
Is this a buying opportunity to consider? Perhaps. After all, besides weak guidance, its latest results did actually deliver some solid revenue growth as well as securing $125m in AI software bookings of its own.
However, personally, with competition becoming increasingly fierce, Adobe’s technological moat might be shrinking. And with uncertainty surrounding the potential fallout from ongoing litigation, I’m not rushing to buy this S&P 500 stock right now.
