SPY & VOO ETFs hit record highs: what’s driving the rally and what next?

The S&P 500 Index and its ETFs have soared to a record high this week, continuing an uptrend that started on March 30th. VOO, the biggest fund in the world, rose to an all-time high of $643, while SPY jumped to $700.

SPY and VOO stocks are soaring as investors look past the Iran war 

The main reason why the S&P 500 Index is in a strong bull run is that Wall Street investors are looking past the Iran war, assuming that the worst has already happened.

For one, the US has already placed a blockade on the Strait of Hormuz, meaning that the situation may improve over time. Trump and Iranian leaders have hinted that they are ready for talks, which may resume in the near term.

The ongoing performance in the stock market is what has always happened whenever a major black swan event happens. American stocks initially plunge as investors sell in panic, and then bounce back as they embrace the new normal.

Some good examples are the crashes that happened at the start of the COVI-19 pandemic and President Donald Trump’s trade war in April last year. 

American companies are reporting strong financial results 

The VOO and SPY stocks are soaring as the earnings season gets underway. Before the earnings, a FactSet report estimated that companies in the S&P 500 Index would report an earnings growth of about 17%.

Most companies have released strong numbers. Goldman Sachs and JPMorgan published strong results, which were boosted by their trading businesses as the Iran war led to substantial volatility.

Other top companies like PepsiCo, Abbott, Charles Schwab, and Bank of New York (BNY) also released strong financial results, which were better than what analysts were expecting.

More companies are expected to publish strong results in the coming weeks, with the most notable to watch next week being Tesla, Amazon, Intel, and Blackstone.

Investors are buying the dip as the fear eases 

The S&P 500 Index is also soaring as investors buy the dip in some of the most troubled sectors in the market.

A good example of this is in the private credit industry, where some of the top laggards have started bouncing back. Blue Owl stock jumped to $10 from the year-to-date low of $8, while Ares jumped to $120 from $94. Other companies in the industry, like Blackstone and KKR, have also rebounded.

Similarly, investors are rotating to the software industry, which has created some major bargains, including popular names like Adobe, ServiceNow, Intuit, and Microsoft. Microsoft stock has jumped to $420 from the year-to-date low of $356, while Adobe rose to $252.

Software stocks have been under pressure in the past few months as investors have reacted angrily to the new product launches by companies like Anthropic. The argument is that some of these products will replace some of these software tools.

VOO stock price technical analysis 

VOO ETF stock chart | Source: TradingView 

The ongoing VOO stock surge is in line with what we predicted a few weeks ago here. It has now soared and moved above the key resistance level at $640, its highest level in January and February. Moving above that level has confirmed that the bullish breakout has happened.

The fund remains above all moving averages, while the Money Flow Index (MFI) has jumped and crossed the neutral point of 50. Therefore, the most likely scenario is where the VOO ETF and other S&P 500 indices continue rising in the near term as investors embrace the Fear of Missing Out (FOMO).