VOO & Chill: What's fueling the S&P 500 ETF's relentless run?

The Vanguard S&P 500 ETF (VOO) is firing on all cylinders this year, and is leaving other top competitors behind. 

VOO & Chill is driving record inflows

The fund, which tracks the blue-chip S&P 500 Index, has continued adding assets at the fastest pace ever recorded. Data shows that it took six times more than other ETFs in August this year.

VOO added $13 billion in inflows last week, bringing its total year-to-date assets to $131 billion. This means that, if the trend continues, it will surpass the record $137 billion it added last year.

It has moved behind of the popular SPDR S&P 500 ETF (SPY) to become the biggest fund in Wall Street. Data shows that it now has over $1.05 trillion in assets under management, while  SPY has $810 billion. 

Notably, its total inflows this year are much more than other S&P 500 ETFs. For example, the iShares S&P 500 ETF (IVV) has had over $21 billion in outflows this year. This is notable since IVV and VOO are similar funds, even in terms of their expense ratios. SPY, on the other hand, has taken in over $12 billion in inflows this year. 

The ongoing surge is driven by the phenomenon known as VOO & Chill. This is a situation where investors move their assets to the fund and hold them for a long time. They believe that beating the S&P 500 Index is one of the toughest approaches in investing. Indeed, most active managers and ETFs often struggle to match the performance of the index. 

VOO ETF has some potential catalysts ahead

Looking ahead, there are reasons to believe that the VOO ETF will continue doing well this year. First, earnings growth is still strong. The average earnings growth in the second quarter was over 50%, helped by the AI boom and tariff refunds. 

Analysts expect that the third-quarter earnings growth will be close to 30%. In most cases, the real figure is usually much higher than expected, meaning that a 40% or higher growth rate is possible. 

Some of the top companies have guided to strong third-quarter earnings growth. For example, Nvidia is expected to make $108 billion this quarter, up by 91% from last year. Similarly, Google’s revenue is expected to come in at $127 billion, up by 25% YoY. Other companies expected to have strong revenue growth are those in the memory industry.

At the same time, it is highly undervalued, trading at a forward price-to-earnings ratio of 19.0, lower than the five-year average of 19.1. Together with the record VOO ETF inflows, chances are that the index will keep doing well.

VOO has formed a bullish flag pattern

VOO chart | Source: TradingView

The daily chart shows that the VOO ETF has formed a bullish flag pattern. This pattern is made up of a descending channel and a long vertical line. In most cases, it often leads to a strong bullish breakout. 

On top of this, the fund has remained above all moving averages. As such, there is a likelihood that it will have a strong bullish breakout, potentially to the all-time high of $715 soon.