The S&P 500 has enjoyed a late surge on the markets this month and it has taken the index to record heights. The index is usually traded by means of mutual funds or exchange traded funds (ETFs) and includes the measured stock performance of 500 large companies within the United States. The share price has surpassed the previous spike at the beginning of this year and with the news of Tesla joining its ranks this week, the trend can only be expected to continue.
Tesla has joined the likes of Apple, Microsoft and Walmart among the list of companies indexed on the S&P 500. This comes after the electric vehicle manufacturer announced a fourth quarter of profits last month, allowing them to meet the second condition required to join the S&P 500. Since the announcement, the share price of the S&P 500 has increased dramatically and currently sits at 3,605.53. A 10.38% increase from the beginning of November and record high for the index. The announcement comes after Tesla’s incredible performance over the past year with the stock price up 428%, year to date. Tesla surpassed the $8 billion market capitalization condition a fair while ago and currently sits at $400 billion, making it the largest company to ever be added to the S&P 500.
The reception of the inclusion has certainly been met with divided opinions. The reason being that Tesla’s stock price has been stated to be ‘wildly overpriced’, yet it continues to perform each quarter. Todd Gorgon, founder of TradingAnalysis.com stated that, “It’s trading at 10 times to sales and that’s crazy expensive for a software company,” Tepper said. “Ford and GM are at way less than 1 times. This is still an automaker at the end of the day. It’s a very capital-intensive business, and I just think it’s very expensive right here.”Whether you have invested in the company or not, it definitely bodes for an interesting year to come.
While the addition of Tesla has been dominating the headlines over the past week, many have overlooked the performance of other industry leaders included in the S&P 500. Apple Inc. has managed to close last week at a value of $119.26, a 58.82% increase for the year. The e-commerce giants, Amazon closed at a value of $3128.81, a 64.85% increase for the year as well. The multinational investment bank, Goldman Sachs expects this upward trend to continue for the S&P 500 and predicts another 20% increase by the end of 2021. The prediction is based on an expected surge in corporate profits throughout 2021 for most companies included in the S&P 500. With the enormous knock that all markets took during the COVID-19 pandemic, this is welcomed news to any investor and only time can prove the validity of these estimations.
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