Dear Investors,
Let me set the scene for you. It’s the late 1980s, and the world of investing feels more like an exclusive club than a place for everyone.
High fees, complicated processes, and limited tools mean that the average person has little chance to invest in a diversified way.
If you wanted access to the entire market, it was practically impossible. And then came October 19, 1987 – “Black Monday.” On that day, the stock market fell over 22% in a single session, leaving investors and regulators in a state of panic.
It wasn’t just the largest one-day drop in market history; it was a harsh reminder of how fragile and inaccessible financial markets were for most people.
In the wake of this chaos, an idea was born. What if there was a product that could give people easy access to the entire market, something simple, liquid, and cost-effective?
That idea became the SPDR S&P 500 ETF, or SPY, in 1993. For the first time, anyone could own a piece of the 500 largest companies in America with a single trade. SPY wasn’t just an investment product; it was a revolution.
And as a global macro investor, I believe its lessons still hold incredible value today.
From Chaos to Innovation: The Birth of SPY
When SPY launched in January 1993, the financial world was skeptical. Could an exchange-traded fund, something that hadn’t been done before in the U.S., really succeed?
At first, it was a niche product. Only the most forward-thinking institutional investors saw its potential.
But as time passed, it became clear that SPY wasn’t just another financial innovation – it was the future of investing.
SPY made investing simpler, cheaper, and faster. Before ETFs, mutual funds were the primary way to get diversified exposure, but they came with high fees and cumbersome processes.
With SPY, everything changed. For a fraction of the cost of mutual funds, investors could now access the entire S&P 500.
It also brought liquidity to the table. Unlike mutual funds, which can only be traded at the end of the day, SPY could be traded throughout the day like a stock. That meant investors had the flexibility to respond to market events in real time.
One of the most impressive things about SPY is how quickly it scaled. By the end of its first year, it had already started gaining traction.
Fast-forward to today, and SPY trades an average of $29 billion daily – more than double the volume of Apple, the world’s most valuable company.
This incredible liquidity isn’t just a statistic; it’s a testament to how essential SPY has become to both individual and institutional investors.
Why SPY Is the Blueprint for Resilient Investing
One of the things I admire most about SPY is its resilience. Over the past three decades, SPY has been tested in some of the most challenging market environments imaginable, and each time, it has proven its value.
Let me take you back to two key moments in market history to show you what I mean.
The first was the aftermath of the September 11 attacks in 2001. The U.S. stock market was closed for six days, marking the longest shutdown in over half a century.
When trading finally resumed, SPY provided a crucial benchmark for market valuation. It helped investors understand where the market stood and offered much-needed transparency during a time of deep uncertainty.
The second moment came during the onset of the COVID-19 pandemic in early 2020. Markets were in chaos, with volatility reaching levels not seen since the 2008 financial crisis.
On February 28, 2020, SPY made history by trading over $100 billion in a single day. That’s more than any ETF had ever traded before.
It wasn’t just a record; it was proof that SPY is a lifeline for investors when markets are at their most unpredictable.
What makes SPY so resilient is its structure. Unlike individual stocks, which can be influenced by company-specific risks, SPY is diversified across 500 companies. This means that even when some sectors or stocks struggle, others can help balance out the losses.
It’s the perfect example of why diversification is one of the most important principles in investing.
What SPY Teaches Us About Macro Investing
As a global macro investor, I often think about the lessons SPY has taught us. At its core, SPY embodies the principles of smart investing: diversification, discipline, and cost-efficiency.
These principles are timeless, and they’re just as relevant today as they were when SPY was first launched.
Diversification is one of the simplest yet most powerful strategies in investing. By holding SPY, you’re not just investing in one company or even one sector – you’re investing in the entire U.S. economy.
From technology giants like Apple and Microsoft to healthcare leaders like Johnson & Johnson, SPY gives you exposure to a broad range of industries. This diversification helps reduce risk and smooth out returns over time.
Discipline is another key lesson from SPY’s history. During the 2008 financial crisis, SPY lost nearly 37% of its value.
For many investors, the temptation to sell was overwhelming. But those who stayed invested were rewarded. By 2013, SPY had more than doubled in value, fully recovering from the crisis and then some.
This is a powerful reminder that time in the market is more important than timing the market.
Finally, SPY highlights the importance of keeping costs low. Its expense ratio is just 0.0945%, far below the average mutual fund fee of around 1%.
Over the long term, these savings can add up to tens of thousands of dollars, significantly boosting your overall returns.
2025: What SPY’s Lessons Mean for Today’s Market
SPY’s lessons are more relevant than ever. The market is shaped by a mix of technological innovation, shifting energy dynamics, and strong economic growth.
Let’s break down what’s happening and how it ties back to SPY.
Energy markets are always in the spotlight. Right now, oil is trading around $74 per barrel, a drop of 3.6% in recent weeks. Lower energy prices can help keep inflation under control, which is a positive for both consumers and businesses.
However, energy remains a volatile sector, making diversification across industries more important than ever.
Technology is another key driver of today’s market. The U.S. government’s $500 billion investment in artificial intelligence infrastructure is expected to create over 100,000 jobs and contribute significantly to economic growth.
For investors, this opens up opportunities in sectors like semiconductors and cloud computing. ETFs modeled after SPY are already helping investors capitalize on these trends.
The broader economy is also showing strength. U.S. GDP growth is projected to reach 3% for the fourth quarter of 2024, well above the long-term average of 1.5–2%.
Corporate earnings are expected to rise by 12.5% year-over-year, providing a solid foundation for market expansion.
SPY, with its broad market exposure, is perfectly positioned to capture this growth.
The Future Is Bright: SPY’s Legacy and Your Next Move
SPY’s story is one of innovation, resilience, and simplicity. It’s more than just an ETF; it’s a blueprint for how to invest successfully.
Even after three decades, it remains a cornerstone of the financial world, offering lessons that are just as valuable today as they were in 1993.
As we look ahead, it’s clear that ETFs are only going to grow in importance. With over 10,000 options worldwide, ETFs now offer exposure to almost every corner of the market.
But SPY will always be special because it was the first to prove that investing could be accessible, efficient, and effective for everyone.
If there’s one takeaway from SPY’s story, it’s this: investing doesn’t have to be complicated. Whether you’re a seasoned investor or just starting out, the principles of diversification, discipline, and low costs are universal.
And with tools like SPY, achieving your financial goals has never been more achievable.
Your Move, Investor
Let me leave you with this thought. Investing isn’t just about numbers or charts; it’s about building a future.
SPY showed us that with the right tools and mindset, anyone can participate in the market and grow their wealth over time.
So here’s my challenge to you: take inspiration from SPY’s journey. Diversify your portfolio, stay disciplined in the face of volatility, and embrace the opportunities that lie ahead. Because in the end, the market rewards those who take action.
The question isn’t whether you should invest – it’s how soon you’ll start.