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SPDR S&P 500 ETF

SPY:NYSEArca

equity ETF | passive | State Street Global Advisors | Tracks S&P Dow Jones Indices

Market Price

US$685.40 (21 Jan 2026)

+16.91% (YoY)

NAV

US$677.35

+1.19% Premium

Yield

1.07%

+3.08% (YoY)

Expense Ratio

9.45%

-87% vs Avg: 73.00%

Making Headlines Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the S&P 500 Index, providing diversified exposure to the 500 largest U.S. companies. With its tight tracking and immense liquidity, SPY is the gold standard for accessing the U.S. large-cap equity market. Bull case projects a NAV of US$800.00 (+16.7%), while the bear case suggests US$550.00 (-18.8%) over 12-18 months. Its low expense ratio and significant trading volume make it highly efficient for all investor types.

⚖️ Risk vs Reward

The underlying S&P 500 holdings trade at a trailing P/E of 27.75x, which is above historical averages, reflecting a market that has priced in significant optimism, especially for high-growth technology companies. While the index has shown robust performance with a 17.73% return over the past year, the elevated valuation implies a more balanced risk-reward profile compared to periods of lower multiples. The ETF's passive, full replication strategy minimizes tracking error but means investors are fully exposed to the S&P 500's inherent market, interest rate, and economic risks. The current market environment suggests potential for continued growth, but also vulnerability to sentiment shifts or economic contractions, with concentration in a few mega-cap names amplifying potential impacts.

🚀 Why SPY Could Soar

• Sustained strong corporate earnings growth, exceeding the estimated 13.18% EPS growth for S&P 500 companies, could drive further valuation expansion.
• A dovish shift by the Federal Reserve, leading to lower interest rates, could reduce the discount rate on future earnings and expand market multiples.
• Increased investor capital inflows into passive U.S. equity strategies could continue to bid up share prices, particularly for the largest and most liquid ETFs like SPY.

⚠️ What Could Go Wrong

• A significant economic slowdown or recession could trigger substantial earnings downgrades and multiple compression, leading to a market correction.
• Persistent inflation could force the Federal Reserve to maintain higher interest rates for longer, negatively impacting growth stock valuations.
• Geopolitical instability or unforeseen systemic risks could lead to broad market panic, causing a flight to safety and sharp declines in equity prices.

🏢 Fund Overview

What Are You Actually Buying

The technology sector encompasses companies developing software, hardware, semiconductors, IT services, and digital platforms—driving market returns through cloud, AI, mobile, and digital transformation.
Tech companies command premium valuations due to high growth rates, scalability, and winner-take-most dynamics, characterized by rapid disruption, high R&D spending, and strong network effects.
Companies range from established giants (Apple, Microsoft) to emerging growth stories in cybersecurity and fintech—typically growth-oriented with lower dividend yields but higher price appreciation potential.
Technology benefits from secular trends like digitization, automation, and connectivity, but is also the most volatile major sector prone to sharp corrections.

Market Dynamics & Outlook

The S&P 500's current valuation, with a trailing P/E ratio of 27.75x, is above its historical average, reflecting investor optimism, particularly in the technology sector which holds a significant weighting of 33.46% in the index.
Underlying companies exhibit an estimated 3-5 year EPS growth rate of 13.18%, suggesting expectations for continued earnings expansion.
Market performance remains highly sensitive to macroeconomic factors such as interest rate expectations from the Federal Reserve and ongoing corporate earnings cycles.

🎯 Why This Matters

Understanding SPY's exposure to the U.S. large-cap market is crucial as its performance is directly tied to the health of the broadest segment of the U.S. economy, offering both significant growth potential during expansions and sensitivity to market downturns.

📈 Valuation & Analysis

Historical Performance

YTD

+17.73%

Yearly Growth (3Y)

+22.84%

Yearly Growth (5Y)

+14.28%

Yearly Growth (10Y)

+14.66%

Yearly Growth (Since Inception)

+10.68%

Current Valuation

The SPDR S&P 500 ETF's underlying holdings collectively trade at a trailing price-to-earnings (P/E) ratio of 27.75x and a price-to-book (P/B) ratio of 5.2x. These metrics suggest that the U.S. large-cap market is trading at a premium compared to its historical averages, a valuation supported by an estimated 3-5 year earnings per share (EPS) growth rate of 13.18% for the underlying index constituents. The current dividend yield is 1.07%, reflecting the growth-oriented nature of many S&P 500 companies. While the market is not in 'bargain' territory, the robust earnings outlook and continued economic growth provide a fundamental underpinning for these elevated multiples.

The Bull Case - Upside to

Strong Corporate Earnings Drive Upside

Medium Probability

If S&P 500 companies continue to report earnings exceeding the 13.18% estimated EPS growth, market sentiment could remain robust, potentially pushing the NAV to US$800.00 (+16.7%) within 12-18 months.

Favorable Monetary Policy from Federal Reserve

Medium Probability

A clear pivot by the Federal Reserve towards rate cuts, or a more accommodative stance, could lead to a significant expansion in equity multiples, driving the S&P 500 higher by 10-15%.

Sustained Economic Growth and Consumer Spending

Probability

Continued resilience in the U.S. economy and strong consumer spending would directly benefit the diverse companies in the S&P 500, leading to revenue growth and supporting higher stock prices.

The Bear Case - Downside to

Economic Recession and Earnings Contraction

Low Probability

A severe economic recession could trigger a 15-20% contraction in corporate earnings and a compression of P/E multiples, potentially driving the NAV down to US$550.00 (-18.8%).

Persistent Inflation and Higher-for-Longer Rates

Medium Probability

If inflation remains stubbornly high, forcing the Federal Reserve to maintain a restrictive monetary policy, higher discount rates could lead to a 10-15% decline in growth stock valuations.

Increased Geopolitical Tensions and Supply Chain Disruptions

Probability

Escalating global conflicts or widespread supply chain disruptions could negatively impact corporate profitability and investor confidence, potentially causing a 5-10% market downturn.

Risk/Reward Assessment

The SPDR S&P 500 ETF presents a balanced risk-reward profile, typical of broad market exposure. The bull case is supported by the expectation of continued strong corporate earnings and a potentially more favorable monetary policy environment, which could drive the index to new highs. However, the current elevated valuations mean that much of this optimism is already priced in. On the downside, the market remains vulnerable to economic downturns, persistent inflation, and geopolitical shocks. While the long-term trajectory for the S&P 500 has historically been upward, investors should be prepared for periods of volatility and potential drawdowns, particularly given the concentration risk within the index's top holdings. For long-term investors seeking broad U.S. equity exposure, SPY remains a core holding, but tactical allocation may be warranted for those sensitive to short-term market fluctuations.

Peer Comparison

• SPY offers unparalleled liquidity and is the oldest and most widely traded U.S. ETF, making it ideal for large institutional trades and active traders. • While its expense ratio of 0.0945% is slightly higher than direct competitors like VOO and IVV (both at 0.03%), the tracking error remains exceptionally low, ensuring accurate index replication. • The fund's unit investment trust structure means it cannot engage in securities lending or reinvest dividends between distributions, resulting in a slight cash drag compared to some peers, though this can enhance safety. • For long-term buy-and-hold investors, VOO or IVV might offer marginal cost savings, but for liquidity and market presence, SPY remains the leader.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
SPDR S&P 500 ETF (SPY) ⭐	9.45%	US$712.1B	17.73%	22.84%	14.28%	1.07%
Vanguard S&P 500 ETF (VOO)	3.00%	US$839.1B	17.84%	22.97%	14.38%	1.10%
iShares Core S&P 500 ETF (IVV)	3.00%	US$750.0B	17.85%	22.97%	14.39%	1.09%

🎯 Why This Matters

The valuation and peer analysis reveal that while SPY offers a highly efficient and liquid way to access the U.S. large-cap market, investors must balance its slightly higher expense ratio against its robust market infrastructure. The current market valuation suggests a period requiring vigilance, as sustained performance hinges on fundamental earnings delivery and favorable economic conditions. Any deviation could impact returns, prompting a re-evaluation of positioning.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	NVDA	N	NVIDIA Corporation	Technology	7.5%
2	AAPL	A	Apple Inc.	Technology	6.3%
3	MSFT	M	Microsoft Corporation	Technology	5.8%
4	AMZN	A	Amazon.com Inc.	Consumer Cyclical	3.9%
5	GOOGL	A	Alphabet Inc. Class A	Communication Services	3.2%
6	AVGO	B	Broadcom Inc.	Technology	2.7%
7	GOOG	A	Alphabet Inc. Class C	Communication Services	2.6%
8	META	M	Meta Platforms Inc.	Communication Services	2.3%
9	TSLA	T	Tesla Inc.	Consumer Cyclical	2.0%
10	BRK.B	B	Berkshire Hathaway Inc. Class B	Financials	1.5%

Fund Mechanics

How It Works

The SPDR S&P 500 ETF Trust (SPY) is structured as a Unit Investment Trust (UIT), which is an older, distinct legal structure for ETFs. As a UIT, SPY is mandated to fully replicate the S&P 500 Index by holding all 500 constituent stocks in their respective market-capitalization weights. This structure, while ensuring very precise index tracking, comes with specific operational limitations. Unlike newer ETF structures (e.g., open-end funds like VOO or IVV), SPY cannot engage in securities lending, which means it foregoes a potential source of additional income that some peers utilize. Furthermore, SPY cannot reinvest dividends received from its underlying holdings between distributions, leading to a slight 'cash drag' in rising markets, although this can be a minor benefit in downtrends.

Holdings Breakdown

Number of Holdings

503

Top 10 Concentration

3777.0%

Top 20 Concentration

5000.0%

Turnover Rate

300%

Category	Weight	Description
Information Technology	33.5%
Financials	13.1%
Communication Services	10.5%
Consumer Discretionary	10.4%
Health Care	9.7%
Industrials	8.7%
Consumer Staples	5.0%
Energy	3.0%
Utilities	2.3%
Materials	2.0%
Real Estate	1.9%

Cost Efficiency

Expense Ratio

9.45%

Median Bid-Ask Spread

0.000%

Metric	1 Year	3 Year	5 Year
Tracking Error	4.00%	4.00%	4.00%
Tracking Difference	N/A	N/A	N/A

Expense Ratio History

Year	Expense Ratio
2025	9.45%
2020	9.45%
2015	9.45%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	17.84%	17.88%	-0.04%	13.90%	-9.85%	0.77
2024	24.98%	25.02%	-0.04%	13.90%	-9.85%	0.77
2023	26.25%	26.29%	-0.04%	13.90%	-9.85%	0.77
2022	-18.15%	-18.11%	-0.04%	13.90%	-9.85%	0.77
2021	28.66%	28.71%	-0.05%	13.90%	-9.85%	0.77

Annualized Return Since Inception

10.68%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
SPY ⭐	SPDR S&P 500 ETF	State Street Global Advisors	9.45%	US$712.1B	17.7%	22.8%	14.3%	1.07%	10.39%	1.27	0.000%
VOO	Vanguard S&P 500 ETF	Vanguard	3.00%	US$839.1B	17.8%	23.0%	14.4%	1.10%	13.90%	0.96	0.000%
IVV	iShares Core S&P 500 ETF	BlackRock	3.00%	US$750.0B	17.9%	23.0%	14.4%	1.09%	10.39%	1.27	0.000%
Category Average			4.75%	—	17.8%	22.9%	14.3%	1.09%	—	1.17	—

Risk Metrics

Beta

0.98

Alpha

0.34

R-Squared

99.71

Standard Deviation

1 Year	3 Years	5 Years	10 Years
13.90%	10.39%	13.90%	13.90%

Sharpe Ratio

1Y	3Y	5Y	10Y
0.77	1.27	0.80	0.86

Sortino Ratio

3 Years	5 Years
1.53	1.03

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
-9.85%	-9.85%	-23.93%	-33.70%

Upside Capture

9900.0%

Downside Capture

9600.0%

Correlations

S&P 500

1.00

Liquidity & Trading

Volume

Avg Daily Shares

79,859,603

Avg Daily Dollar Volume

US$54716.8M

Trend

increasing

Bid-Ask Spread

Metric	Value
Median (Percent)	0.000%
Median (Dollar)	US$0.00
During Hours	0.000%
At Close	0.000%
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	118.80%
30-Day Average	4.00%
1-Year Average	4.00%
Standard Deviation	N/A
Max Premium (1Y)	10.00%
Max Discount (1Y)	-10.00%

Creation/Redemption Activity

Trend

Not enough data

Net Flows

Period	Net Flow
1 Month	US$-14610.0M
1 Year	US$-9110.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.