John GreenThe S&P 500 closed at 7,805.45 on Tuesday 13 October 2026, a hair below the all-time closing high it set on 6 October, according to Reuters and CNBC market reports. For UK savers holding a US tracker in an ISA or pension, the headline number hides a second question: what is the pound doing to your return?
What is the S&P 500 doing right now?
The index hit its first record close since mid-August on 6 October and is up more than 14% for the year, per Reuters. It then drifted sideways: CNBC reported a near-flat session on 12 October as big-bank results and a slide in memory chip stocks offset each other. On 13 October the index slipped 0.02% after JPMorgan's results missed expectations and its shares fell 0.9%.
Two forces now shape the next move. FactSet projects 29.6% earnings growth for the S&P 500 this quarter, which would be a fourth straight quarter above 25%. Against that, Benzinga reports Treasury yields at a 24-year high this month, which raises the bar for share valuations.
Why does the pound matter to a US tracker?
A tracker that buys US shares is priced in dollars. Your ISA statement is in pounds. Your return is therefore the index move plus or minus the change in the dollar-sterling rate over the same period.
Some funds are "currency hedged", which removes most of that effect for a small extra cost. Most popular S&P 500 trackers sold to UK retail investors are not hedged, so the exchange rate passes straight through. A record index level in dollars does not guarantee a record valuation in pounds.
This matters most when the index and the dollar move in opposite directions, which is not rare. Rising US yields tend to support the dollar, but a sharp equity sell-off can send investors toward safe havens in either direction.
What does the earnings season change for you?
Large US banks started reporting in the week of 12 October, and technology and energy companies follow over the next three weeks. Strong results can keep the index near its peak even with high yields. A miss, as JPMorgan showed on 13 October, can move a single stock by nearly 1% in a day and drag on the whole index because financials carry real weight.
For a UK holder the practical point is simple: you cannot time earnings reactions, but you can decide how much of your portfolio depends on one market and one currency.
A concrete case: £50,000 in an unhedged US tracker
Take an investor in Leeds who put £50,000 into an unhedged S&P 500 tracker inside a stocks and shares ISA at the start of the year. Assume, for illustration, that the index gains 14% in dollars, in line with the year-to-date figure Reuters reported.
If sterling stays flat against the dollar, the holding is worth about £57,000, a gain of £7,000. If sterling instead strengthens by 5% against the dollar over the same period, the pound value of that gain shrinks to roughly £51,500, because each dollar buys fewer pounds. That is a currency drag of about £5,500 on a £7,000 gain.
Now reverse it. If the index falls 10% and sterling weakens 5%, the loss in pounds is closer to 5% than 10%, because the weaker pound partly cushions the fall. The same holding can therefore look much better or worse in sterling than the index chart suggests.
The if/then logic is the point. If you hold only US equities, then your pound result depends on two bets at once. If you add a hedged share class or a global fund, then you reduce how much one exchange rate decides the outcome. The right mix depends on your time horizon and your other assets, and the numbers above are an illustration, not a forecast.
Is hedging worth paying for?
A hedged share class uses currency contracts to strip out most of the dollar-sterling movement. It is not free. Hedged trackers usually carry a slightly higher ongoing charge, and the hedge itself has a running cost tied to the gap between UK and US interest rates. When US rates sit well above UK rates, as they have for much of the past few years, that cost can be noticeable over a decade.
Hedging also removes the upside. In years when the dollar rises against the pound, an unhedged holder gains twice: once from the shares and once from the currency. Long-term investors often accept currency swings because they expect them to even out over fifteen or twenty years. Shorter-term savers, such as someone planning to draw on the money in three years for a house deposit, face a very different calculation.
On a £50,000 holding, a 0.15 percentage point higher annual charge costs about £75 a year. That is small next to a 5% currency swing worth £2,500, but only if the swing goes against you. Neither number tells you which way the exchange rate will move.
What do high Treasury yields mean for share prices?
When government bonds pay more, the future profits of companies are worth less in today's money. That is why a 24-year high in Treasury yields, reported by Benzinga this month, puts pressure on the most expensive parts of the market. Technology and growth companies tend to feel it first because much of their value lies in profits expected years from now.
It also changes the choice for savers. A cash ISA or short-dated gilt now competes more seriously with equities than it did when yields were near zero. Holding some money in lower-risk assets is not a sign of pessimism. It is the other side of the same trade-off, and it matters most for people within five years of retirement who cannot easily wait out a 20% drop.
How much can you shelter from tax?
The 2026 to 2027 ISA allowance is £20,000 per person, and gains and dividends inside an ISA are free from UK income and capital gains tax, according to the official GOV.UK individual savings accounts guidance. Moving money in from a taxable account is a separate step, which our earlier piece on a bed and ISA with an S&P 500 tracker explains. Note that US dividends carry withholding tax at source, which an ISA does not always recover, so check the fund's structure.
For a view on how concentrated the index has become, see our analysis of S&P 500 concentration for UK investors.
What should you do now?
Four checks take an hour and cost nothing:
- Confirm whether your tracker is hedged or unhedged. The factsheet states it.
- Work out what share of your total savings sits in US equities, including any in your workplace pension.
- Decide whether a fall of 10% in dollars, combined with a currency move, is a loss you could sit through.
- Review your fund's ongoing charge and its dividend tax treatment.
A regulated wealth manager can model these scenarios against your actual holdings, tax position and retirement date. You can compare vetted wealth management experts on Expert Zoom and book a consultation before the next earnings week moves the market.
This article is general information, not personalised financial advice. The value of investments can fall as well as rise, and you may get back less than you invest. Past performance does not predict future returns.
