4 key catalysts for the Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 Index Fund (VOO) is firing on all cylinders this year as it became the best-performing fund in terms of inflows. Its stock has risen for three consecutive weeks and is nearing its all-time on record. It was trading at $514 on Tuesday, a few points below its record high of $520.

VOO is beating IVV and SPY

The Vanguard S&P 500 Index ETF has continued adding substantial sums of money this year. According to ETF.com, it has added assets in each month this year, with July being its best one. In that month, the fund added over $12 billion, a big increase after it added just $494 million in June. 

These additions have made it the second-biggest S&P 500 index ETF in the world with over $488 billion. 

Most importantly, the fund has added more money than the popular SPDR S&P 500 Index ETF (SPY), which has lost over $14 billion in assets. The fund has lost assets in five of the last eight months and this trend could continue. It now holds over $565 billion in assets. 

On the other hand, the iShares S&P 500 ETF (IVV) has also been a top performer this year as it added almost $42 billion in assets. It is the second-biggest one in terms of inflows after the VOO ETF. 

The other top-performing ETFs in terms of inflows were the Vanguard Total Stock Market (VTI), which has added $20 billion in assets and Invesco QQQ ETF (QQQ), which has added over $18 billion. 

Therefore, analysts believe that it is a matter of time before the VOO ETF and even the IVV moves past State Street’s SPY fund. 

This performance is primarily because of the fee differentials between the three funds. The SPY fund charges an expense ratio of 0.09% while the other two charges just 0.03%. As a result, Morningstar has given the SPY a 4-star rating while VOO and IVV have a five-star rating.

Morningstar argues that it makes no sense for investors to pay higher fee for the SPY than the other two yet they track the same asset. For example, if you had a $100,000 investment, you will pay an annual fee if you invested it in the SPY ETF. 

You will then pay $30 in VOO and IVV ETFs. In a decade, all factors constant, then your fees will be $900 and $300. 

S&P 500 index has three key catalysts

Looking ahead, VOO and other S&P 500 index ETFs have three fundamental and one technical catalysts ahead.

First, there are signs that corporate earnings are doing well even as the economic slowdown continues. Data by FactSet shows that the earnings growth of companies in the S&P 500 index stood at 10.90% in the last quarter. 

This spectacular growth was the highest level since Q4’21. Analysts expect that the earnings growth will continue since most companies provided positive growth estimates.

Second, the ETF could see more inflows if the Federal Reserve starts cutting interest rates as most analysts expect. These rate cuts will have a major implication for the financial market since investors have shifted over $6.1 trillion to money market funds, which are yielding over 5%. 

When rate starts coming down, there are chances that a rotation from bonds to stocks. If this happens, VOO will be one of the top beneficiaries.

Therefore, this week’s Jackson Hole summit will be crucial for stocks and other assets since the Fed is expected to confirm whether it will start cutting rates. 

Third, the much-feared recession fears seem to be overstated. Besides, the US has continued to report strong numbers recently. Inial jobless claims have risen for three consecutive months, inflation has pulled back, while retail sales have been vibrant. 

Additionally, the VOO ETF may benefit from the return from summer and the conclusion of the US general election in November.

VOO ETF analysis

VOO chart by TradingView

The other bullish factor for the VOO ETF is that it has strong technical tailwinds, especially if it moves above the key resistance point at $520, the all-time high. Moving above that level will see the fund invalidate the dangerous double-top pattern as it did in May this year. 

The Vanguard S&P 500 ETF has remained above the 50-day and 100-day Exponential Moving Averages (EMA), meaning that bulls are in control. 

Additionally, the price has just jumped above the ultimate resistance of the Murrey Math Lines, meaning that it is not overshood, 

Meanwhile, oscillators like the Relative Strength Index (RSI) and the MACD have all pointed upwards. 

Therefore, a break above the key resistance level at $520 will mean that bulls have prevailed, which will push it much higher to the overshoot level of $531 and then the extreme overshoot point at $562.