The S&P 500 has produced staggering results for investors over the past decade. Consider this: it has delivered a 25% or more total return (in US dollars) in four out of the past seven years.
Wow!
But what about 2026? How is the index getting on year to date?
All-conquering
I’m sure the S&P 500 needs little introduction. It’s like a dream team of US companies, with a quite astonishing level of dominance across various sectors.
In technology, there’s the familiar giants of Apple, Microsoft, Amazon, Meta, Tesla, and Google-owner Alphabet. In payments, there’s Visa and Mastercard.
As for chips, the S&P 500 contains Nvidia, Advanced Micro Devices (AMD), Micron, Intel and Broadcom. Big Pharma is represented through Eli Lilly, Johnson & Johnson, and Merck.
The index boasts the world’s leading companies in fast food (McDonald’s), coffee (Starbucks), beverages (Coca-Cola and Pepsi), sportswear (Nike), streaming (Netflix and Disney), asset management (BlackRock), and hotels (Marriott and Hilton).
Other juggernauts worthy of mention include Walmart, Uber, and GE Aerospace. Future components will likely include SpaceX, Anthropic, and various other ground-breaking companies yet to list.
Is the S&P 500 beating the FTSE 100 in 2026?
You can consider investing in the index through something like the iShares Core S&P 500 ETF (LSE:CSPX). This version reinvests dividends back into the fund, supporting a higher level of compounding over time.
Year to date, the ETF is up around 10%.
Therefore, someone who had bunged ten grand into the index at the start of 2026 would now have roughly £11,000 (ignoring trading fees and currency movements). That slightly edges the total return of the FTSE 100 (around 9.3%).
What are the red flags?
Looking at this, I can see why Warren Buffett is a fan of people just buying an S&P 500 index tracker and calling it a day. However, I do see a couple of key risks right now.
The first is a very high level of concentration, with almost 30% weighted towards the top five firms (Nvidia, Apple, Microsoft, Amazon, and Alphabet). While these are obviously exceptional businesses, it presents significant risk if the tech sector sells off heavily.
For example, if there’s an AI bubble and it pops at some point, then the index could underperform for some time (potentially years). In particular, chip stocks, while seemingly cheap today, could collapse if tech giants start reining in AI spending.
Second, we have a historically high valuation. According to some calculations like the CAPE (cyclically adjusted price-to-earnings) ratio, the S&P 500 is the most overvalued it has been since the 2000 dot-com bubble.
Now, I should mention that this ratio has been flashing red for quite some time. Anyone who sold out of the index a couple of years ago due to valuation concerns would have missed out on very strong subsequent gains.
Also, analysts are expecting record earnings for S&P 500 firms in 2026, driven by AI-related spending and productivity gains.
Nevertheless, I’m not convinced today is the best time to consider investing £10,000 in the S&P 500. I think investors doing so should tread carefully.
To my mind, there are better opportunities about in individual stocks that are trading far more cheaply. In particular, the UK market is full of cut-price shares that also pay decent dividends.
Should you invest £5,000 in iShares VII Public - iShares Core S&P 500 Ucits ETF right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if iShares VII Public - iShares Core S&P 500 Ucits ETF made the list?
Ben McPoland owns shares in Nvidia, Uber, and Visa.
