The S&P 500 Index is one of the most broadest indicators of the U.S. stock market’s health. In recent weeks it has taken a real beating, down $4 or so — about 5.5%. As such, this index serves as a sort of Key Performance Indicator for the U.S. economy. It is a free-float capitalization weighted index of 500 of the largest companies listed on stock exchanges in the United States. Standard & Poor’s is one of the big three financial services firms. It sets the ingredients for this benchmark, which investors, financial analysts and economists watch like hawks.
Though on a recent downtrend, the S&P 500 is still arguably the most traded and most tracked index of US stocks. It covers all industries – not just tech, healthcare, and finance. This year’s showcase is a vivid example of just how diverse the market has become. Since it is a market-capitalization-weighted index, it tells us not just how individual companies are doing, but how the whole economy is doing – both directly and indirectly.
Yet the S&P 500 Index itself has a long and colorful legacy, beginning with its launch in 1957. Over the decades, like many markets, it has had to change and rechange its rules hundreds of times to keep pace with a rapidly evolving economic environment. Its continued relevance and flexibility reestablished its rule. The latter is celebrated as the true indicator of where the U.S. stock market is really at.
The decline in the S&P 500 comes amid a backdrop of economic uncertainty, with various factors contributing to investor apprehension. Our financial markets are almost in a constant state of upheaval every time a geopolitical event occurs, a data point is released, or policy shifts. These variables may dramatically impact market mood and investor action.
Today, the S&P 500 is broad-based US equity market performance benchmark. So traders and investors alike watch oil’s every move to get a sense of the economic direction we’re headed in. That provides another terribly important barometer about the market, about investor confidence. This knowledge can be a tremendously powerful influence in determining future investment priorities, whether in personal or organizational investment plans.
Further, because of the index’s compilation of companies from almost any sector, the index gets a broader look at economic activity. This diversity provides a buffer against steep declines in particular sectors powering down the performance of the entire index. Nevertheless, significant declines in major sectors such as technology or healthcare can still exert considerable influence on the index's trajectory.
Standard & Poor’s is the world’s foremost provider of financial market intelligence, including the widely followed S&P 500 Index. It’s this agile methodology that helps keep their index the best, most accurate and most reliable measure of the health of our housing market. The company's expertise and commitment to transparency contribute to the index's status as a trusted resource for market participants.