Published On: Wed, Feb 7th, 2018

A Bigger Picture of the Stock Market: S&P 500 Since 1957

This month, the famous S&P 500 index will turn 60 years old. Because of the troubling signs at the stock markets, we take a minute to zoom out and take a look at how this index has evolved over the decades.

Following the Standard & Poor’s 500 stock market index’s performance since its launch in March 1957, you are left wondering whether the steep mountain that has piled up since the 1980s is admirable or depressing. When you look at the bigger picture over the past 60 years, the question arises if the most recent headlines about the stock market woes somehow miss the point. You can clearly make out the two most severe recent crashes: the Dot-Com Bubble that started bursting in 2000 and the Financial Crisis that took hold late in 2007.

The S&P is based on the market capitalization of 500 large domestic companies listed on the NYSE or NASDAQ. Formerly called the Composite Index, and later Standard & Poor’s Composite Index, the index had first been launched on a small scale in 1923, it began tracking 90 stocks in 1926 and expanded to the current 500 in 1957. Here’s an overview of other stock market indices.

Infographic: A Bigger Picture of the Stock Market | Statista You will find more infographics at Statista

 

Stock market indices – Statistics & Facts

Most countries all over the world have a stock exchange where both local and international companies are traded. A stock exchange facilitates the trading process and allows the prices of the listed companies to be defined by the laws of supply and demand. The number of traded companies usually ranges between a couple of hundred in less developed financial markets to as many as a couple of thousand in the mature markets. It would be a very time-consuming task to examine the performance of the leading companies in a given country in order to assess the stock market sentiment, not to mention to track the market performance on various global stock exchanges. That is why the stock indices prove to be so useful.

A stock market index measures the performance of a segment of the stock market. It is calculated based on the prices (and often market capitalization) of the companies which belong to the index.

Global indices are a benchmark of the international stocks performance. MSCI World, for example, consists of leading companies from developed countries all over the world.

The Dow Jones Industrial Average index (DJIA) is one of the oldest and most well known indices worldwide. In the beginning the index was composed of industrial stocks (hence the name), but today its constituents are thirty leading U.S. companies from various industry sectors.

In Europe, the most popular country indices are FTSE 100 (UK), CAC 40 (France) and DAX 30 (Germany). Also, the Euro Stoxx 50 index, composed of the Eurozone blue chips, is traced by global market participants.

In Asia, the main indices are, among others, Nikkei 225 (Japan) and the Shanghai Stock Exchange Composite index (China).

 

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