Sp500 index what. S & P500: an indicator of the direction of the economy

Greetings! What I like about the stock market is its “predictability”. Just yesterday, all analysts unanimously recommended buying "X" and dropping "Y". But then there is a referendum in Great Britain or a drought in Brazil ... And now it is necessary to buy "Y" and sell "X" as soon as possible.

Don't believe me? Let's see how the dynamics of the SP500 index reacts to the recent events. But the S & P500 is considered one of the most predictable benchmarks not only in the United States, but also in the world!

Today, the S&P 500 Index (stock ticker SPX) includes the shares of five hundred US giants in the leading sectors of the economy. I will not list all the participants, I will name only a few "big names": Oracle, Nike, Procter & Gamble, Coca-Cola, McDonalds, Microsoft, Visa, Xerox and Apple. All in all, this is the most accurate US and America business sentiment.

Analysts believe that another great advantage of it is the ability to respond almost online to the growth of a particular industry and the popularity of a particular company. For example, in the "dense" 1980 the share of the technology sector in the index was only 9%, and today there are already 21% of such companies in Esenpi!

The index was developed and launched in 1957 by the international rating agency Standart & Poor's. True, in Russia this company is better known for news like “Standard & Poor’s agency has lowered credit rating Russia to the speculative level ”.

What are the criteria for this or that company to be included in the index?

First, it must be American (not only by "origin", but also by place of business, corporate structure, stock exchange listings and accounting standards).
Second, the market capitalization of a company cannot be less than $ 4 billion.
Third, the company must be financially stable (have net profit for four quarters in a row) and “adequately liquid”. That is, at least half of the company's shares must be in free float.

According to this criterion, the S&P 500 does not include, for example, the brainchild of Warren Buffett - Berkshire Hathaway. The point is that the lion's share valuable papers BRK.A is concentrated in the hands of members of the Buffett family, not in free circulation. Low stock liquidity means that the actions of just two or three investors can quickly change the value of Berkshire Hathaway. And given its serious capitalization, this will affect the price of the entire index as a whole.

Well, and fourthly, all companies from the index operate either in the manufacturing sector or in the service sector (industry, transport, finance, utilities). The S&P does not include investment companies(excluding real estate funds), royalty trusts, holdings and partnerships.

S&P 500 online quotes chart

How has he behaved for the past forty years?

Since 1976, the benchmark has shown steady growth (especially in the 1980s and 1990s). In the new 21st century, the index experienced only two major downturns. The first occurred in the wake of the bursting of the dot-com bubble in the early 2000s, the second - won back the consequences of the 2008 crisis. Since 2010, he has confidently caught and has grown every year. Interestingly, since 1985 (that is, over thirty years), it has risen in price 30 times!

On June 6, 2016, the SP500 index reached its maximum value since the beginning of 2016 - 2109.41 points. The main catalyst is the speech of the head of the Fed in Philadelphia. Janet Yellen said that rates will rise gradually and only against the backdrop of strong macroeconomic data.

What impact did the UK referendum have on him? After the announcement of the Brexit results stock indices The US fell 2.5-3%. On June 24, the S&P lost 3.3% in value.

And on June 28, S&P Capital calculated losses from "force majeure": in just two working days, the stock markets lost about $ 3 trillion. At the same time, $ 1 trillion. fell just on the five hundredth. And this was the third largest drop in the entire history of the index. In fairness, I will note that not only he collapsed, but also other candidates.

Nobody knows what will happen next. Until the market stabilizes, the index can jump sharply in one direction or the other. And to build at least short-term forecasts, it is necessary that three indicators at once find a new equilibrium point. "Three whales" - this is the pound sterling rate, the euro rate and securities quotes. And as far as I understand, such a moment will not come very soon.

Let me remind you that before the ill-fated referendum, forecasts for the S&P 500 boiled down to the fact that by the end of 2016 it should have grown to 2200.

How to buy the S&P 500?

It is impossible to buy and sell the S&P 500 index directly - it is just a numerical value that is calculated using a special algorithm. In its pure form, it is needed not by investors, but by analysts.

For trading, derivatives are used financial instruments which are based on the index and replicate its movement exactly. Options for such assets:

(e.g. Vanguard 500)
(for example, SPDR S & P500)
(frankly, they are more related to than to investing)

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S&P 500 (Standard & Poor's 500) - a popular index stock market USA, which reflects a capitalization of 500 largest companies traded primarily on the NYSE and NASDAQ. The S & P500 is often used to determine the general level of prices in the stock market and as one of the indicators of the general state of the economy.

This index includes 500 major companies from various industries. The S&P 500 focuses primarily on large-cap companies that are traded in the US stock market. However, since the index includes a significant portion of the total market size (it covers about 80% of the total market capitalization), we can say that the S&P 500 reflects the general state of the market.

The main requirements for companies to be included in the S&P 500 Index:

The index includes US companies listed on the NYSE and NASDAQ.
The market capitalization of the company should be over US $ 5.3 billion. This criterion is reviewed periodically.
The minimum liquidity threshold is determined by the monthly trading volume. By the date of the valuation of the company, it must be at the level of more than 250,000 shares per month for six months.
There must be at least 50% of the company's shares in public circulation.
The total profit for the last 4 quarters should be positive.
The influence of the company on the weight of the sector in the S&P 500 index is taken into account.
Must be at least 6 months after the initial public offering of the company.

One of the features of the S & P500 is that for calculating the index values when determining the capitalization of companies, only free float shares (stocks available for trading) are taken into account. Changes in the composition of the S&P 500 are made as needed and announced in advance - usually 1-5 days before the effective date.

S&P 500 Index Chart (Standard & Poor's 500)

Using the S & P500 Index for Investing and Trading

The S & P500 index is used as a general indicator of the state of the US stock market, to assess the effectiveness of various investment methods, as well as directly for trading and investing through financial derivatives.

It should be noted that it is impossible to buy directly the S&P 500 index itself, since in fact it is only a numerical value calculated on the basis of a certain set of data. In its pure form, the index is used for analytical purposes. For trading and investments, derivative financial instruments are used, built on the basis of the S & P500 and fully correlated with it.

For example, there are special index funds that completely repeat the dynamics of the index. These funds buy stocks from the S&P 500 in the same proportions as in the index. As a result, when a new company is added to the S&P 500, its shares begin to grow - various funds need to buy these shares so that their portfolio will continue to fully correspond to the index. The first index fund to follow the S&P 500 was the Vanguard 500, which has been in operation since 1976 and is part of the Vanguard Group.

Learn more about instruments for executing transactions with the S&P 500 index

For transactions, they usually use S&P 500 index futures, options, and various ETFs for trading the stock market. When trading through forex brokers, you can use CFDs on the S & P500 index futures (the name of the instrument for CFDs may differ, for example, US 500 - index-based CFD specification).

For trading and as a tool for investing in the S&P 500, you can use ETFs (exchange-traded fund), which are a portfolio of the corresponding assets included in the S & P500 index. In the American stock market, SPY (SPDR S&P 500) is often used as such an instrument. There are similar instruments on some other large stock exchanges. For example, IUSA (ISHARES S&P 500) on London stock exchange and others. Access to trading on the stock market for individuals is provided by specialized brokers, for example, United Traders.

Monthly SPY (S&P 500 Index ETF)

You can also use futures for investing and trading the index. The following S&P 500 futures are available for trades on the Chicago Stock Exchange (CME):

SP - full-size contracts (much less liquid instrument compared to ES);
ES - E-mini S&P 500, contracts with a lower value, the price is 1/5 of the full contract. This futures is characterized by a high degree of liquidity.

It is also possible to use options. Options on the S & P500 can be traded through the CBOE (Chicago Board Options Exchange). You can use the services of the company to trade futures and options.

The S&P 500 is one of the main instruments that reflects the capitalization of the US stock market. Over the long history of the index, its popularity has only grown, which is an indirect confirmation of the relevance of the methods underlying the calculation of Standard & Poor's 500. As a result, a number of different derivatives were created that have a high degree of liquidity and are suitable for both investment and active trading. ...

Per capita, unemployment and inflation. With the beginning of the formation of stock markets, the question arose of which instrument would adequately assess the degree of market influence on economic development... The solution to this problem was the emergence of indices as the main indicators of changes in stock prices. The very first such instrument was the Dow Index of the American journalist, which originally included 11 industrial companies (today this figure is 30).

At the heart of the Dow Jones is an unweighted method of calculation, that is, calculations are carried out by finding a simple arithmetic mean. However, time has shown that for a clearer forecast of the dynamics of the stock market and the direction of the economy as a whole, a more interesting index is needed, which will be an indicator for the entire level of development of the country's economy, and the totality of these indices for the world economy.

Key Features of the S & P500 Index

The American agency Standard & Poors has developed an instrument that reflects the main trends of the US stock market, and published it on March 4, 1957. The S&P index includes the 500 largest joint stock companies in America, which, in fact, is already obvious from its name. Calculating the S & P500 fundamentally different on the method of calculating the Dow Jones index, since the method is used not of a simple arithmetic mean, but of an arithmetic weighted average. The weights are the level of the company's capitalization. The calculation of this index is carried out by the specialists of the Standard & Poor's rating agency, which has been operating in the market for more than 150 years. The S & P500 is not the only index for this company. The agency has developed several similar indicators, which bear the abbreviated name of the parent company (S&P 400, 600, 1500). The 500th received the greatest distribution and world recognition, since it covers about 80% of the total capitalization of the American market and is rightfully considered the main indicator of the direction of development of the American stock market.

Joint stock companies on the index list comply with sectoral balance: among them there are 400 industrial, 20 transport, 40 financial and 40 utility companies. The S & P500 includes companies belonging to various industries, which allows you to obtain global view on the state of affairs in the American stock market.

Company Selection System for S & P500 List

Add to S & P500 Index Basket includes joint stock companies that meet the following requirements:

Belonging to a manufacturing or service sector
High level of capitalization (from 4 billion and more)
High level of liquidity (the average annual turnover must be at least 30% of the total market capitalization of the company)
Financial stability
companies are listed on the largest exchanges
More than 50% of the shares are in public circulation (i.e. at least half of the company's securities must be traded on the stock markets, and not be in the possession of any beneficiary)
The company is registered in America

In addition, the list of the index does not include government agencies or companies, one of the beneficiaries of which is the state.

The composition of the S & P500's joint stock companies changes relatively frequently. No specific time periods have been set, changing positions takes place depending on the changing market situation... Companies can be excluded from the list naturally - through bankruptcy or as a result of a significant decrease in the level of capitalization or liquidity, when trading volumes decrease and investor interest in the company cools. As soon as one of the companies ceases to meet the selection criteria, it is replaced by another one that meets this criterion, and the composition of the index basket is revised. When compiling the list of joint stock companies for the S & P500, the index committee of the agency Standard & Poor's is guided by exclusively objective factors and strives to stabilize this list as much as possible.

Inclusion in the index list has a positive effect on company recognition... As a result of the action joint stock company, which is on the S & P500 list, will most likely buy more actively. But still financial markets affect the development and economy of the company only indirectly. Exists indicator-linked fundsS& P500 , they include stocks of companies from the index list (in this case, the S & P500 acts as an investment vehicle). As companies appear on the index, stock market players revise their portfolios in favor of new entrants, thereby increasing the firm's capitalization.

S & P500 records

Minimum rates the index was observed at the very beginning of its history. A strong drawdown of the index was at the end of 2008 - at the beginning of 2009. Maximum index value was recorded on April 11, 2013. and amounted to 1593 points.

What is the S & P500 for?

First of all, the S & P500 was created to assess the American economy, and based on its indicators, decisions to buy or sell an underlying asset... The companies included in the index can behave in different directions during the day or over a longer period of time. Index - dynamic indicator, created to show the general trend and direction of the economy. This factor can be simultaneously attributed to the disadvantages of the index, because The S & P500 reflects only the current state of affairs, and its readings will not be enough if a forecast is needed... The main goal of the S & P500 is to cover as much as possible the directions of development of the American stock market, but, unfortunately, it is not possible to assess the movement of the market in the future.

In addition, the S & P500 gives additional option investors portfolio which, in turn, helps to reduce the level of price risk. Also, with the help of the S & P500, some traders carry out their work speculatively, that is, they make money on market movements.

S & P500 competitors

The S & P500 tracks the dynamics of the US stock market more clearly than its competitors. Although, it is worth noting that in principle, there are no direct competitors for the index... Among the American counterparts, we can mention the NASDAQ index, which analyzes the high-tech market and the popular Dow Jones industrial index. Each of them has a narrower focus and does not cover the American market on the scale of the S & P500. If we are not talking about America, then, of course, there are specialized indices that calculate economic indicators only within a specific country. The S & P500 initially does not compete with similar national indices.

Impact of the S & P500 index on the Russian market and its relationship with the RTS

The Russian stock market is highly dependent on changes in the US economy. Most Russian traders attach great importance to the American S & P500 index, adding it to the list of major investment indicators along with the dollar exchange rate, oil prices and the European index (primarily the German DAX index).

Exists strong correlation between the S & P500 and the popular RTS index in Russia which appeared in 1995. The Russian index was created in the image and likeness of the American one: its indicators are calculated according to an identical scheme (by calculating the arithmetic mean value, weighted by the company's capitalization level, expressed in US dollars). The main difference is the number of organizations included in the index basket.... RTS includes only 50 companies due to the lower volume of Russian market compared to the American one.

Understanding the composition of the S&P 500 will help investors increase the return on their portfolios. ETFs based on it can become a pillar pension savings... Here are seven fun facts about the index.

Most of us are used to news about the "American market" without really thinking about what a "market" is. Of course, they usually mean the stock market, and its fluctuations are monitored using indices. Dow jones Industrial Average (INDEX: DJI) and S&P 500(INDEX: SPX).

To become a good investor, you should learn more about the most popular American index - the S&P 500 (Warren Buffett himself recommends investing in it). Here are a few interesting facts about its structure and features.

The S&P 500 appeared in March 1957, when a liter of gasoline in the United States cost about $ 0.07. In the same year, young Elvis Presley bought the Graceland estate. Initially, the index included 425 industrial, 15 railroad and 60 utility companies. Financial corporation stocks were added in the 1970s.

S&P 500 covers the main part of the market

The S&P 500 includes 500 corporations. Their number may seem relatively modest, since the American market numbers several thousand companies. However, these 500 corporations are the largest in the United States. Together, their value is about 80% of the total market capitalization. According to the agency Standard & Poor "s, the S&P 500 is considered the best universal indicator of US large-cap stocks.

Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Amazon.com (NASDAQ: AMZN), Facebook (NASDAQ:), ExxonMobil (NYSE: XOM), Johnson & Johnson (NYSE : JNJ), Berkshire hathaway (NYSE: BRK-B.NYSE), JPMorgan Chase (NYSE: JPM) and Alphabet (NASDAQ: GOOG). Here is a breakdown by sector:

To be included in the index, a company must meet various criteria. For example, its capitalization must be at least $ 6.1 billion (this threshold changes over time), the minimum turnover shares must exceed 250 thousand shares per month for six months before the company is included in the index.

Dividend yield

Since the S&P 500 includes many companies that pay dividends, the index has its own dividend yield... Currently, it is about 2%. Dividend profitability many companies in the index exceed this mark:

But the profitability of the S&P 500 is not low - it exceeds the profitability of many large companies:

The index is used to calculate the market value

Many investors use price / earnings (P / E) ratios to determine whether a stock is overvalued or undervalued. The S&P 500 Index allows you to carry out a similar operation for the entire market. Indeed, in March, some analysts raised the alarm - the cyclically adjusted P / E ratio (CAPE) then exceeded 30 points. Since 1871, this has been observed only three times. They said that the index (and, accordingly, the market) was too far ahead of the fundamentals and could collapse. This is exactly what happened in the previous two cases (the S&P 500 has declined slightly since then).

S&P 500 capitalization weighted

The most important distinctive feature the index is its weightedness by capitalization. The S&P 500 was the first US index to be built on this principle. For comparison, the oldest US index, the Dow Jones Industrial Average, which includes only 30 stocks, is value-weighted.

What is the difference? In a value-weighted index, the highest-priced stocks are dominant, no matter how large or small the issuing company is. For example, 3M (NYSE: MMM) (current $ 200 stock) will have a stronger impact on the Dow than Apple (current $ 152). Wherein market capitalization 3M is about $ 117 billion, and Apple's capitalization exceeds 800 billion. Apple is the most valuable company in the world, but its contribution to the Dow is less than 3 M. Since the Dow is very old - it first appeared in the 1880s - it is unlikely. that the methodology for calculating it will change.

Capitalization-weighted indices better reflect the market situation. In the S&P 500, Apple's share is almost seven times the share of 3 M. However, this methodology is also not ideal. Although Apple's share is 3.9%, other large companies such as Facebook, Procter & Gamble (NYSE:) and Home Depot (NYSE:) hold more than 1%, the share of hundreds of smaller companies does not exceed 0.2%. For example, Harley-Davidson's contribution (bonds and 90% to the S&P 500 index fund with minimal costs (for example, Vanguard (NYSE: VOO.NYSE). There are many index funds from various asset management companies. Just pick one with a low commission... Another easy way to invest in the S&P 500 is to buy shares in an exchange-traded fund such as the SPDR S&P 500 ETF Trust (NYSE: SPY.NYSE). The shares of an exchange-traded fund are similar to stocks. You can easily buy them and sell them in the right amount. SPY shares are currently priced at around $ 238, with a 2% dividend yield and an annual commission of just 0.1%.

Understanding the characteristics and structure of the S&P 500 index helps an investor to make money. For example, you can invest in an index fund your retirement savings, or you can simply invest the bulk of your capital, counting on good long-term results.

Prepared by Liza Dobkina

Many traders observe the dynamics American indices Dow Jones, S & P500 and NASDAQ, which, in turn, show the big picture of the most developed economies in the world. The base for calculating the oldest Dow Jones Industrial Average index is 30 companies and 30 stocks, the NASDAQ index specializes in highlighting the dynamics of high-tech companies, but the S&P 500 index is somewhat more suitable for the role of a barometer of the American economy, since it was compiled by changing the dynamics of 505 stocks 500 the largest companies listed on the NYSE and NASDAQ. It should be noted that for this index, the most liquid instrument is traded on the CME (Chicago Mercantile Exchange) exchange - a futures contract for the E-MINI S & P500 (ticker ES), and a somewhat less liquid brother of futures for the S & P500 (ticker SP, 5 times more expensive - 250 $). On the NYSE, an ETF is traded on the S & P500 index - SPDR S&P 500 ETF Trust (ticker SPY, one of the most liquid ETFs on the NYSE with a turnover of about $ 40 million per session), so as not to collect shares of the index basket separately in the appropriate proportion, but to earn on changing the index value. In this article, we will take a closer look at what it is - the S&P index, how it is calculated and what it affects.

Indices calculated by Standard and Poor's

The S&P 500 index, like the Dow Jones index, is calculated by the world famous rating agency Standard and Poor’s, which, in turn, belongs to the American media holding McGrow Hill, which has been named S&P Global Inc since 2016 (traded on the NYSE, ticker SPGI). Together with Moody’s and Fitch, this agency is included in the “big three” rating agencies and assigning long-term and short-term ratings to both issuers and individual debt obligations in 26 countries for 150 years. By the way, in order to be included in the indexes of bonds on the Moscow Exchange, the issue must have a certain rating of the indicated agencies.

The S&P and Dow Jones family indexes have their own website. By the way, the S&P and Dow Jones indices are calculated not only for stocks, but also for bonds, commodities, and real estate:

Rice. 1. Asset classes of indices of the S&P and Dow Jones families

Also, these indices are segmented by region:

Rice. 2. Gradation of families of indices SnP and Dow Jones by regional basis

By the way, these families have more than 1000 indices. And only the global stock indices - 41 pieces. By the way, it is noteworthy that the share of Russia in the main global index S&P Global BMI (the calculation base is approximately 10 thousand shares of 25 developed and 23 emerging markets) is 0.5% (64 securities for $ 602,811 million in terms of capitalization), and the share of, for example, South Africa - 0.7% (130 securities for $ 419,315 million in terms of capitalization). In the S&P Emerging BMI index (for inclusion in which the market must be at least $ 100 million in terms of capitalization with a turnover of at least $ 50 million), we occupy the honorable sixth line with 4.9% with the same indicators immediately after South Africa, which is ranked 7 , 3%.

Rice. 3. Country structure of the SnP Emerging BMI index

S & P500 index: what it is and how it is calculated

The S & P500 Index is the first capitalization-weighted index including free-float. Its history began in 1957 with a value of 10 pp. The S & P500 index is calculated based on the prices of 505 shares of the 500 largest companies with a total capitalization of about $ 7.8 trillion, which covers about 80% of the US market.

The S & P500 is part of the S&P Dow Jones U.S. family of indices. Equity. It also includes the S&P MidCap 400, S&P SmallCap 600 indices, which together with the S & P500 form the S&P Composite 1500 index. To be included in the S & P500 index calculation base, a company must be a US resident, its capitalization must be at least $ 5.3 billion, the share free-float (free float) - at least 50%. Also, the company must show profit for the last 4 quarters before being included in the index basket. The index is rebalanced quarterly on the third Friday of the month ending the quarter.

The S & P500 index is calculated not only in USD, but also in AUD, BRL, CAD, CHF, EUR, GBP, HKD, JPY, MXN, SGD. As for the fundamental indicators of companies from the calculation base, they are as follows: P / E - 24.34, P / B - 2.82, P / S - 1.9, P / Cash Flow - 16.34, and the average dividend yield is 2.07%. The weight of the most capitalized company - Apple - 3.3%. The weight of the TOP-10 companies in terms of capitalization - Apple, Microsoft, Exxon, Amazon.com, Berkshire Hathaway, Johnson & Johnson, Facebook, JP Morgan, General Electric and AT&T - is 18.2%. As for the sectors of the US economy, for which the S & P500 index is calculated.

The average turnover of the most liquid CME futures contract - the E-Mini S & P500 - is approximately 1,500,000 contracts / day, and the average open interest is about 3,000,000 positions.

Output

Undoubtedly, the S & P500 is important for investors as it is the main barometer of the US stock market. In addition, its derivatives are of great interest.

Do you want to learn all the nuances of working with the S & P500 index and start making money on changes in its dynamics? Register on the Otkritie Broker portal - we will tell you where to start your training and share useful materials!