Halfway through 2018, S&P 500 delivers little to investors

Halfway through 2018, investing in Wall Street's leading S&P 500 stock index has been nothing to shout about. The index of about 500 of the largest US corporations has risen 1.7 percent year to date, far short of its 8 percent increase in the first half of 2017, even as the technology-heavy Nasdaq and Russell 2000 index of smaller companies hit record highs.
Including dividends, the S&P 500 has returned about 3 percent in 2018, compared with nearly 22 percent last year. Mutual funds and exchange traded funds with over $3 trillion in assets use the S&P 500 as their benchmark, according to Thomson Reuters Lipper, making the index's performance central to Wall Street.
While newly enacted corporate tax cuts propelled a nine-year bull market higher in January, fears of an escalating global trade war lately have become a persistent counterweight denting sentiment.
Investors currently favour small-cap stocks because those companies are seen as benefiting more than large companies from the deepest overhaul of the US tax code in over 30 years, with some on Wall Street also betting that smaller companies may be less at risk of trade tariffs.
The Russell 2000 index is up 7 percent year-to-date, while the Nasdaq has surged 9 percent, buoyed by the tech sector's popularity with investors.
The Dow Jones Industrial Average has declined 2 percent in the past six months, weighed down by double-digit declines in 3M Co, Procter & Gamble Co, Caterpillar Inc and General Electric Co, which in June was evicted from the group of 30 top-shelf US corporations.
Market strategists polled by Reuters last month predicted on average that the S&P 500 would post an annual gain of 7 percent in 2018, more modest than the 9 percent increase they predicted in a February survey.
Since hitting an all-time high on Jan. 26, the S&P 500 index has fallen 5 percent, with declines in banks and consumer staples offsetting a recovery in technology stocks including Apple Inc and Facebook Inc, both up close to 10 percent in the past six months.
Financials, which account for about 13 percent of the S&P 500, have been badly bruised, falling 11 percent since the index's record high. Morgan Stanley, Goldman Sachs Group Inc, and Citigroup Inc have each fallen 15 percent since Jan. 26.