The Vanguard S&P 500 ETF (VOO) remained in a tight range this week as investor sentiment weakened and as the earnings season continued. The VOO ETF was trading at $580, a few points below the all-time high of $587. This article explains why the fund is about to surge.
VOO ETF to surge ahead of Fed interest rate cuts
The first main catalyst for the VOO ETF is that the Federal Reserve will likely cut interest rates this year now that the American economy is deteriorating.
A report released by the Bureau of Labor Statistics (BLS) showed that the US economy added 73,000 jobs in July. The number was significantly lower than what analysts had expected.
The BLS also downgraded its jobs numbers for the previous two months, implying that the economy averaged just 35,000 jobs.
Therefore, there are signs that the bank will ignore the stubborn inflation and decide to cut interest rates in the September meeting. Goldman Sachs analysts see three cuts this year, a move that will boost stocks.
Christopher Waller, who has emerged as a top contender for the Fed Chair, has also advocated for cuts.
The Fed will then continue cutting interest rates in 2026 when Donald Trump replaces Jerome Powell with a new chair. Historically, the US stock market thrive when the Fed is cutting rates.
New normal on tariffs
Another reason the VOO ETF stock price is likely to continue surging is that the market is now embracing the new normal regarding tariffs.
Donald Trump has implemented sweeping tariffs this year, including a 39% one on Switzerland. All goods entering the US are now subject to a tariff of at least 10%.
Tariffs are never beneficial to companies, as they increase the cost of doing business and impact demand. In fact, many companies have mentioned about these tariff issues when discussing their earnings.
However, on the positive side, there are signs that the trade war fears have peaked. Looking ahead, the US will likely announce trade deals and not escalations. Two potential deals will be with countries like India, China, and Brazil, which will boost the VOO ETF this year.
The earnings trajectory is good
The other bullish catalyst for the VOO ETF is that companies are announcing better-than-expected earnings.
A report released last week by FactSet showed that the average earnings growth for companies this quarter is 10%. If this is the actual number, it will be the third consecutive quarter of double-digit earnings growth. The report also noted that analysts were boosting their Q3 estimates, saying:
“In July, analysts slightly increased EPS estimates for S&P 500 companies for the third quarter. The Q3 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q3 for all the companies in the index) increased by 0.1% (to $67.40 from $67.32) from June 30 to July 31.”
VOO ETF stock has bullish technicals
Another bullish catalyst for the VOO ETF stock is its bullish technicals. It has jumped from a low of $441 in April to a high of $588 this month.
The stock remains above the important resistance level at $560, the highest point in February this year. Surging above that level was notable as it invalidated the double-top pattern.
The ETF is being supported by the 50-day moving average, while oscillators are pointing upwards. Therefore, the stock will likely keep rising, with the next key level to watch being the psychological point at $600.
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