S&P500 prospects in 2022

AFTER a stellar performance for 2021 with 26.9 per cent full-year returns, the S&P500 (SPX) started this year tumbling 7.5 per cent to a low of US$4,410 on Jan 24. The movement broke past its 200-day moving average, which was not seen since March of 2020 when Covid-19 hit American soil. The dip also saw the index break out from its ascending channel, finding support around the US$4,290 levels that could be traced back to September and October last year.

But the decline in the SPX fell short of a correction territory criterion (which typically sees the index fall by more than 10 per cent), unlike the Nasdaq 100 index (NDX), which dropped 15.9 per cent to a low of US$13,724 on Jan 24. Investors can attribute this to the difference in components of both indexes. The SPX consists of 500 companies representing diverse sectors - in contrast to the 100 companies of the NDX, which are mainly technological sectors.

What caused the decline?