Here’s why the iShares S&P 500 ETF (IVV) has climbed 7% in a month

The iShares S&P 500 ETF (ASX: IVV) has been a solid performer for investors over the last month, it has risen by 7%. That’s a stronger performance than the 6.2% return for the S&P/ASX 200 Index (ASX: XJO).

As some investors may be aware, the performance of an exchange-traded fund (ETF) is dictated by the underlying holdings.

If, collectively, the value of the businesses that an ETF owns go up, then this benefits the ETF’s value.

The same can happen going downwards as well. When the group of shares that the ETF owns go down in value, then this would hurt the value of the ETF.

The S&P 500 represents a portfolio of around 500 businesses.

What shares are in the iShares S&P 500 ETF?

These are some of the biggest holdings in the S&P 500 ETF on 12 August 2022:

Apple (7.3%)

Microsoft (6%)

Alphabet (3.9%)

Amazon (3.5%)

Tesla (2.1%)

Berkshire Hathaway (1.5%)

UnitedHealth (1.4%)

Nvidia (1.3%)

Johnson & Johnson (1.2%)

Of course, there are hundreds of other names like Costco, Disney and McDonalds.

How did those names perform?

Let’s have a look at how some of the biggest positions have performed over the past month, as these are the ones that would have the biggest influence on the overall iShares S&P 500 ETF performance.

Over the last month, Apple shares are up 17.75%, Microsoft shares are up 15.4%, Alphabet shares are up 12%, Amazon shares are up 25.9% and Tesla shares are up 28.6%.

These numbers indicate that the biggest shares actually performed much better than the overall S&P 500 index – it was other index constituents that didn’t do as well. For example, over the past month, the Johnson & Johnson share price is down 4.7%.

Why are the technology shares rising?

To truly know the answer to that question, you’d need to ask the buyers and sellers of those shares of the past month why they transacted at the price they did. This could explain what has happened to the iShares S&P 500 ETF.

There has been a lot of volatility in 2022. Investors have been trying to get to grips with inflation and rising interest rates. Central banks are increasing interest rates to try to bring inflation under control.

Warren Buffett once said this about interest rates:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.

But, some iShares S&P 500 ETF investors may be thinking that interest rates may not need to go as high as previously expected. Monthly inflation in the US may have peaked after the latest figure was lower than the previous month. But, the next question is not ‘how high’ inflation goes, but ‘how long’ elevated inflation remains. Time will tell.

The post Here’s why the iShares S&P 500 ETF (IVV) has climbed 7% in a month appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Costco Wholesale, Microsoft, Nvidia, Tesla, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and UnitedHealth Group and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Nvidia, Walt Disney, and iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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