A prominent Wall Street advisor believes the S&P 500 index could reach 15,000 by 2030.
Warren Buffett has been the CEO of Berkshire Hathaway since 1965. He oversees a portfolio of 45 publicly traded stocks and securities worth $316 billion, as well as a $277 billion cash pile and several wholly-owned private businesses.
Under Buffett’s leadership, Berkshire stock has delivered a compound annual return of 19.8% over the past 59 years, which can turn a $1,000 investment into more than $42 million.
But Buffett and his team are professional stock pickers who manage Berkshire’s investment portfolio full-time. He knows the average investor will have a hard time replicating his returns, so he recommends buying exchange-traded funds (ETFs) to track the performance of indexes like the S&P 500 instead. Recommended.
In fact, Berkshire has two S&P 500 index funds in its portfolio. Vanguard S&P 500 ETF (VOO -0.76%) and SPDR S&P 500 ETF Trust (SPY -0.78%). One top Wall Street analyst predicts the S&P 500 index will reach 15,000 by 2030, and if his predictions are correct, these index funds could deliver 158% returns over the coming years.
Image source: Motley Fool.
The S&P 500 is home to the highest quality stocks
The S&P 500 is an index of 500 companies from 11 different sectors of the U.S. economy, so it is highly diversified. We have very strict entry criteria and only the highest quality names are chosen. Among other things, a company must be worth at least $18 billion and be profitable based on the sum of its earnings per share over the last four quarters.
Even then, admission is at the discretion of a special committee that rebalances the index on a quarterly basis.
The S&P 500 is weighted by market capitalization. This means that the largest companies in the index have more influence on performance than the smallest companies. As a result, it’s no wonder that the technology sector accounts for 32.2%, considering that all of America’s $6 trillion companies are based in the technology sector.
Below are the top five stocks in the S&P 500 and their individual weights.
stock
S&P 500 weighting
1. Apple
7.13%
2. Nvidia
6.79%
3.Microsoft
6.33%
4. Amazon
3.57%
5. Metaplatform
2.61%
Data source: State Street Global Advisors. S&P 500 weightings are accurate as of October 10, 2024 and are subject to change.
Each of the five companies mentioned above is developing artificial intelligence (AI) in some capacity, and given the high value of their emerging industries, they could continue to drive the S&P 500 higher.
Vanguard ETF vs. SPDR ETF: Which one should you buy?
Investors can’t go wrong with either one. Both are designed to directly track the performance of the S&P 500, so there won’t be much difference in returns.
However, the Vanguard ETF has an advantage due to its very low cost. The expense ratio is only 0.03%. This is the percentage of funds withheld each year to cover administrative costs. With an expense ratio of 0.0945%, the SPDR ETF costs more than three times as much to own.
As such, Vanguard ETFs have delivered slightly better returns over time because they can more closely track the performance of the S&P 500 after fees.
fund index
Annual compounded profit (last 3 years)
Annual compounded profit (last 5 years)
Annual compounded profit (last 10 years)
S&P500
11.91%
15.98%
13.38%
Vanguard ETF
11.88%
15.93%
13.33%
SPDR ETF
11.78%
15.82%
13.23%
Data source: Vanguard, State Street Global Advisors.
S&P 500 could rise 158% by 2030
Investors should take all Wall Street predictions with a grain of salt, as analysts don’t always get things right. But Tom Lee of Fundstrat Global Advisors has made some notable S&P 500 predictions over the past few years.
Lee predicted the index would reach 4,750 in 2023 (many other analysts were bearish), ending the year at 4,769. He entered 2024 expecting the index to reach 5,200, but later raised the target to 5,500 and then again to 5,700. It currently exceeds all three levels.
Lee recently released a long-term prediction that the S&P 500 index could reach 15,000 by 2030. This represents a whopping 158% upside from here, and if he’s right, that’s the return investors can expect from the Vanguard and SPDR ETFs.
Is Tom Lee right?
Tom Lee says the S&P 500 will benefit from significant demographic tailwinds as we approach 2030, as Millennials and Gen Z enter the prime years of their lives (ages 30 to 50). . This is usually when people make the most money and when they make important life decisions such as investing.
Lee also points to AI as a potential driver of stock market returns. He said the global workforce could be short by 80 million people by 2030, and more investment capital would be directed to technologies such as AI that drive automation.
For the S&P 500 index to reach 15,000 by 2030, it would need to grow at an average annual rate of 16.6% over the next six years. This is much higher than the 10.5% compounded annual return since its inception in 1957, but only slightly higher than the average return over the past five years, as discussed previously.
If hypergrowth themes like AI continue to dominate the S&P 500 as they have in recent years, Lee may well be right. But even if the index doesn’t reach 15,000 by 2030, history suggests it will get there eventually, so it’s important for investors to consider the S&P 500 index as recommended by Warren Buffett. – It’s never a bad time to buy a fund.
Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETFs. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
