The S&P 500 Index and its top ETFs, like VOO and SPY remained in a tight range in the past few months as jitters in the AI industry accelerated. It was trading at $6,775, a few points below the year-to-date high of $6,930. This article explores some of the top catalysts for the index and its ETFs.
S&P 500 Index to benefit as inflation falls
The S&P 500 Index has been in a strong bull run this year, moving from a low of $4,835 in April to the current $6,775. This growth will likely accelerate after this week’s macro data.
A report released by the Bureau of Labor Statistics (BLS) showed that the US unemployment rate rose to 4.6%, its highest level in years.
Another report released on Thursday revealed that the headline and core inflation retreated in November, a trend that may continue as the price of crude oil drops.
Therefore, the combination of higher unemployment rate and low inflation means that the Federal Reserve will maintain a dovish tone in 2026. A Polymarket poll estimates that the Fed will deliver three cuts, higher than the one that the bank estimated.
The stock market normally does well when the Fed is cutting interest rates, as this normally makes bonds less attractive.
AI boom to continue
The main reason why the S&P 500 Index has wavered in the past few months is that there are concerns that the AI boom has started to falter. This explains why many AI stocks like CoreWeave, Nvidia, Oracle, and Broadcom have tumbled in the past few weeks.
Investors are concerned that some of the large deals that OpenAI has made are not real as the company has a long runway towards profitability.
Still, there is a likelihood that the AI boom will continue in the foreseeable future, as evidenced by the recent Nvidia earnings. The report showed that the revenue rose to $57 billion in the third quarter, while its guidance pointed to a $67 billion revenue figure in 2026.
Recent news events show that the boom is continuing. For example, Blackstone is backing an Oracle data center that Blue Owl Capital backed off. OpenAI is also negotiating a funding deal valuing it at $800 billion, while companies like Anthropic and IREN are continuing to invest.
Therefore, there is a likelihood that highly embattled AI companies like Oracle and Broadcom will rebound once the ongoing panic ends.
Earnings growth to continue
Meanwhile, there is a likelihood that earnings growth will continue in the coming year, continuing a trend that has been going on this year.
FactSet data shows that the S&P 500 Index had an earnings growth of 13% in the third quarter, higher than what analysts were expecting.
Another report estimates that the S&P 500 will have an earnings growth of 8.1% in the fourth quarter, making it the 10th consecutive quarter of earnings growth. Chances are that the earnings growth will be much higher than estimates.
Earnings growth will be robust as inflation falls and as the impact of Donald Trump’s Big Beautiful Bill spreads in the economy.
S&P 500 Index to rally if it flips key resistance
The daily timeframe chart shows that the S&P 500 Index has been in a strong uptrend in the past few months. Recently, however, there are signs that it has formed a double-top pattern at $6,930 and a neckline at $6,526.
A double-top pattern is one of the riskiest patterns in technical analysis. Therefore, the most likely scenario is where it retreats a bit in the coming weeks, potentially to the neckline at $6,525.
In the future, however, there is a possibility that the index will rebound and possibly move above $7,000 in 2026. This view will be confirmed if it moves above the key resistance level at $6,930.
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