The S&P 500 Index (Standard & Poor’s 500) is a key benchmark that reflects the overall health and trends of the U.S. stock market. Its movements are closely watched by global investors, including those in Vietnam. This article analyzes the S&P 500’s performance over the past decade, with a particular focus on its impact on the U.S. life insurance industry.
Overview of S&P 500 Growth in the Past Decade
Long-Term Trends and Returns
Over the long term, the S&P 500 has demonstrated the ability to deliver impressive returns. Since its modern structure was established in 1957, the index’s historical average annual return has hovered around 10% to 11%. While individual years may see sharp fluctuations, this average underscores the potential of long-term investment in U.S. equities.
In the most recent decade (roughly from the mid-2010s to mid-2020s), the S&P 500 continued its upward trajectory, albeit interrupted by periods of volatility. Depending on the calculation method, 10-year annual returns ranged from about 11.3% to 13.8%, translating to a total return of 171% to 266%, outpacing historical averages. Notably, strong years like 2023 (around 24%) and estimated gains for 2024 (23%) underscore the index’s resilience, even after weaker or negative years. The power of compounding ensures that, even with downturns, stable, long-term positive returns can significantly grow capital.
Recent Annual Returns of the S&P 500 (Illustrative)
|
Year |
Annual Total Return (%) |
Key Events |
| 2017 | ~19.4% – 21.8% | Trump’s first year, Tax Cuts & Jobs Act |
| 2018 | ~ -4.4% – -6.2% | Tariff concerns, market correction |
| 2019 | ~28.9% – 31.5% | Strong rebound, Fed easing |
| 2020 | ~16.3% – 18.4% | COVID-19 crash & rapid recovery, stimulus |
| 2021 | ~26.9% – 28.7% | Continued recovery, strong earnings |
| 2022 | ~ -18.1% – -19.4% | Soaring inflation, aggressive Fed hikes |
| 2023 | ~24.2% – 26.3% | Market rebound, AI boom, easing inflation |
| 2024 | ~23% – 25% (Estimated) | Continued strength, tech-driven momentum |
Note: Returns are approximate totals (including dividends) from multiple sources. Precise figures may vary based on methodology.
Notable Growth and Recession Cycles
The upward trend of the past decade hasn’t been linear. It followed the prolonged bull market that started after the 2008 – 2009 Global Financial Crisis. Key periods include:
- Growth Phase: Extended to early 2020, with a strong post-COVID rebound from March 2020 to early 2022.
- Bear Market Periods:
- Feb – Mar 2020: A rapid >30% drop due to COVID-19.
- 2022: Roughly a 25% decline from the peak, triggered by inflation and Fed rate hikes.
- Corrections (declines >10%): Occurred sporadically, notably during Trump’s trade-related tensions.
Understanding maximum drawdowns is essential. Despite attractive long-term returns, investors must be prepared for sharp portfolio declines that may take years to recover from.
Analyzing Volatility and Investment Risk in the S&P 500
Volatility is inherent in equity markets. Even though the S&P 500 is diversified, it still exhibits significant swings. One key concern in recent years is market concentration. Since the index is market-cap weighted, the largest companies exert an outsized influence.
By 2024, the top 10 stocks accounted for 33% of the S&P 500’s total value, more concentrated than during the dot-com bubble. The Information Technology sector alone represented over 30%. Heavy reliance on a few tech giants (Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta) introduces sector-specific risks. Investors seeking diversification through the S&P 500 may unwittingly be overexposed to a single sector or group of firms. This challenges the notion that the S&P 500 fully represents the U.S. economy.
Attempting to “time the market” (buy low, sell high) is extremely difficult. Missing just the top 10 trading days can drastically reduce long-term returns. A strategy like Dollar-Cost Averaging (DCA) – investing a fixed amount periodically – can reduce the risk of investing at market peaks.
The S&P 500’s Performance Under President Trump (2017 – 2021)
U.S. Stock Market Volatility in the Trump Era
During Donald Trump’s presidency (Jan 2017 – Jan 2021), the S&P 500 delivered a strong but volatile performance. The estimated total return over his 4-year term was approximately 63% – 68% (~14.1% annually), a historically solid outcome.
Notably, the market surged in Trump’s first year (+19% in 2017), defying the “presidential cycle theory,” which typically forecasts a weaker first year. Sectors like Technology, Financials, and Defense thrived, while Energy lagged due to trade war concerns. However, volatility was high, often driven by policy announcements and geopolitical tensions.
Trump-Era Policies and Their Impact on the S&P 500
- Tax Cuts and Jobs Act (2017): Drastically reduced corporate and individual tax rates, viewed as an economic and market catalyst.
- Tariffs and Trade War: A major source of volatility. Tariffs – particularly on Chinese goods – sparked negative reactions in the S&P 500 due to rising costs, supply chain disruptions, retaliatory measures, and heightened uncertainty. Market sell-offs were common following tariff announcements. The unpredictable implementation worsened investor anxiety.
- Deregulation: Positively received by some sectors and contributed to investor optimism.
The unpredictability of Trump’s policy decisions, especially on trade, created an unstable environment, making business planning difficult and prompting sharp investor reactions. This uncertainty acted as a market driver, often rotating capital toward defensive sectors.
Comparison of S&P 500 Performance Under Trump and Other Presidencies
The S&P 500’s annual return of 14.1% during Donald Trump’s presidency was strong but not a record. It was slightly lower than under Bill Clinton (15.2% per year), roughly on par with or slightly better than Obama’s second term (~13.8% per year), and far superior to the negative returns during George W. Bush’s terms. Performance under Joe Biden has also been robust (~11.7% per year as of early 2025).
Comparison of S&P 500 Performance During Trump’s Term and Other Recent Presidents
|
President |
Term | Annual S&P 500 Return (%) (Est.) | Total S&P 500 Return (%) (Est.) |
Key Context (Illustrative) |
| Bill Clinton | 1993 – 2001 | ~15.2% | ~+73% to +78% per term | Tech boom, balanced budget |
| George W. Bush | 2001 – 2009 | ~-6.2% | Negative | 9/11, Dot-com aftermath, Financial crisis (end) |
| Barack Obama | 2009 – 2017 | ~13.8% | ~+75% (first term) | Post-crisis recovery, Obamacare, QE |
| Donald Trump | 2017 – 2021 | ~14.1% | ~+63% to +68% | Tax cuts, deregulation, tariffs, COVID-19 (end) |
| Joe Biden | 2021 – 2025 | ~11.7% (as of early 2025) | ~+58% (as of early 2025) | COVID recovery, inflation, and rate hikes |
Note: These are rough estimates and may vary by source and calculation date.
However, attributing market performance solely to a president is an oversimplification. Other influencing factors include:
- Inherited and evolving economic conditions
- Federal Reserve monetary policy
- Global shock events (e.g., COVID-19)
- Congressional control
- Initial market valuations
Thus, although Trump-era policies like tax cuts and tariffs had tangible effects, the S&P 500’s overall performance was the result of a complex interplay of various forces.
Impact of the S&P 500 Index on the U.S. Life Insurance Market
How does the S&P 500 affect insurers’ investment returns?
U.S. life insurance companies manage massive asset portfolios from premium inflows in “general accounts.” These funds are invested to generate returns for claims and operational costs. While they primarily invest in fixed-income assets (bonds), they also allocate a portion to equities, including stocks in the S&P 500. Thus, when the S&P 500 performs strongly, returns on the equity portion rise.
However, insurers’ financial health is more sensitive to interest rates than to stock market swings. They must match long-term assets with long-term liabilities. Prolonged low interest rates reduce profit margins on bonds. Conversely, sharp rate increases can lead to unrealized losses on existing bond portfolios (as seen during the U.S. regional banking stress in early 2023).
Therefore, while the S&P 500’s performance matters, interest rate environments and bond portfolio risk management are more fundamental to the industry’s stability. Policies that indirectly affect inflation and interest rates (e.g., tariffs) can significantly impact this sector.
Understanding Indexed Universal Life (IUL) and Its Connection to the S&P 500
Indexed Universal Life (IUL) insurance is a product that ties life insurance cash value growth to equity indices like the S&P 500. Key mechanics:
- Money is not directly invested in stocks.
- Cash value grows based on the chosen index’s performance (e.g., S&P 500), but is subject to:
- Cap Rate: Maximum credited interest rate, even if the index grows more (e.g., S&P 500 +24%, Cap 10% → credited 10%).
- Floor Rate: Minimum credited rate, usually 0%, protecting from market losses (e.g., if S&P 500 drops → 0% interest, no loss to cash value).
- Participation Rate: Percentage of index gains credited (e.g., 80% Participation, S&P 500 +10%, Cap 12% → 8% credited return).
IUL’s appeal lies in its potential to benefit from market upswings without exposure to downside risk – the “Zero is your hero” approach. However, cap rates represent a trade-off: in bull years, IUL returns may lag far behind direct investments. IUL suits those prioritizing stability and protection over pure growth.
Difference from VUL: Variable Universal Life (VUL) invests directly in sub-accounts (similar to mutual funds), meaning policyholders bear both gains and losses. VUL offers higher growth potential, but with higher risk.
Impact on Product Pricing and Industry Stability
Cap, floor, and participation rates in IUL contracts are set by insurers based on hedging costs (buying options), expected returns, and market volatility. High volatility or low rates may lead insurers to offer lower caps/participation for new contracts.
Ultimately, all insurance guarantees depend on the insurer’s financial strength. Prudent asset management, strong underwriting, and adequate capital reserves are critical. S&P 500 performance is just one influence on insurers’ health. Major players like Prudential, MetLife, New York Life, MassMutual, Northwestern Mutual, and asset managers like BlackRock, Vanguard, and Fidelity play key roles in this ecosystem.
Investor Insights and Considerations
Recognizing risks and opportunities from U.S. market volatility
U.S. market fluctuations, especially the S&P 500, represent both risks and opportunities for Vietnamese investors.
Risks:
- Capital loss during downturns
- U.S. policy risk
- Overexposure to tech sectors
- VND/USD currency risk
- High valuation risk
Opportunities:
- Buying low during corrections
- Long-term growth potential
- Dollar-cost averaging (DCA) helps manage risk
Considerations When Investing in S&P 500-Linked Products
Vietnamese investors can access the S&P 500 through:
- Direct Investment: Buying S&P 500 ETFs (SPY, IVV, VOO) or mutual funds via domestic/international brokers. This method allows direct exposure (gains/losses) to index performance and generally has low fees.
- Indirect/Linked Products (e.g., IUL): Weigh the trade-off between protection (0% floor) and limited upside (cap). Understanding fees and contract terms is essential. IUL insurance is a long-term product that combines life coverage with cash accumulation and may not suit investors solely seeking maximum investment growth.
Consulting a qualified financial advisor is crucial to determine investment strategies that align with your risk tolerance, objectives, and personal circumstances.
Conclusion
The S&P 500 offers substantial long-term growth potential, but with inherent volatility. Trump’s presidency illustrates how policy, especially trade-related, can significantly sway markets. While S&P 500 performance influences the U.S. life insurance sector, particularly through products like IUL Secrets or Max Funded IUL, interest rates remain the core driver of industry health.
For Vietnamese investors, understanding the historical dynamics of the S&P 500, associated risks (policy, sector concentration, currency), and the structure of related investment products is essential to making informed financial decisions.
FAQs
- In summary, how did the S&P 500 perform under Trump compared to other presidents?
The S&P 500 delivered strong overall returns during Trump’s presidency (around 14.1% annually), comparable to or higher than some recent terms (Obama’s second term, Biden) but lower than during Clinton’s tenure. However, his term saw higher volatility due to trade policy uncertainty. Market performance results from many factors, not just the president alone. - How did Trump’s tariff policies specifically impact the S&P 500?
Tariffs increased costs, disrupted supply chains, triggered concerns over retaliation and recession, and heightened uncertainty. Frequent tariff announcements often led to sell-offs and sharp corrections in the S&P 500, significantly contributing to market volatility during his presidency. - Does an IUL policy truly protect me from all stock market losses?
IULs typically offer a 0% “floor” on interest credited based on index performance (such as the S&P 500). If the index declines, your cash value doesn’t decrease due to negative market performance. However, policy charges and administrative costs are still deducted, which can slightly reduce the total cash value even when the credited interest is 0%. It protects against market loss in terms of credited interest, not against all reductions in account value due to fees. - As a Vietnamese investor, what are the main risks I should consider when investing in the S&P 500?
Key risks include: natural market volatility; U.S. policy risks (trade, taxes); concentration risk in large tech stocks; VND/USD exchange rate risk; and valuation risk when the market is at high levels.
Thinksmart Insurance