As a holder of multiple US shares, hearing that the S&P 500 index has been tested this week hasn’t been pleasant news for me. The market index has been able to hold above 4,370 points, which could mean that there was nothing to be worried about in the end, but I’m not certain.
Although my US shares are NASDAQ companies, they are also listed in the S&P 500, and because the S&P 500 is weighted based on market capitalisation, they have a heavy say on the index. It is generally thought of as the best index to value US stocks overall. If confidence is diminishing in the S&P 500, this could also spread to the index’s top companies such as Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA).
What is affecting the S&P 500?
As far I see it, there are two main factors causing uncertainty among US stock investors. The first is the rise in delta variant cases in the US. Infection rates are spreading by 20% week-over-week and Covid-related hospitalisations have risen 26.5% in America. As a result, this could negatively affect GDP.
The second factor follows the news that the Federal Reserve (Fed) revealed it could be reducing its monthly asset purchases this year. When this news was first revealed back in July, it caused a 2.3% decrease in the S&P 500. With the timing of Fed’s stimulus withdrawal coming closer, this might have other investors on red alert and could cause share prices to drop.
What I’m doing with my shares
Although the S&P 500 dropped to a low of 4,382 points this week and could follow this trajectory into next week, I’m not selling my positions any time soon.
I own shares of Apple, Tesla, and Enphase Energy (NASDAQ: ENPH). None of them have had a great week in terms of their share price.
Currently, the Apple share price has dropped by 1.5% in the last five days, reaching a low of $144.91. Apple is currently facing issues over an industry shortage of chips. The semiconductor industry was partly shut-down due to Covid-19 and is still playing catch-up. However, Apple’s recent quarterly results have been very impressive, with a 36% increase in revenue.
The Enphase Energy share price sunk by almost 4% last week, to a price of around $166 as I’m writing. Enphase reported excellent financial results in its FY21 Q2 results with a 5% increase in revenue from Q1 to $316.1m. Enphase shares are expensive with a price-to-earnings ratio of 128.42.
The Tesla share price fell by just under 3% in the last five days. Tesla is currently facing a federal probe into its autopilot feature, with concerns over the safety of hands-free driving. This could explain the drop in price. However, the company’s financials are showing positive growth and strong revenue.
My outlook on the S&P 500 drop
For me, the important thing is to look at how a company is performing first, and then to analyse market trends as a secondary concern. It could be that these three shares will fall next week if the S&P 500 continues to drop, but this won’t dislodge my long-term dedication to these shares. Despite the drop, I’ve held these high-performing shares for a while and they are still green in my portfolio. I’ll be holding them for the foreseeable future.
