The S&P 500: A delve into the world’s biggest stock market index

Julie Brownlee, Fsp Invest, 21 Oct. 2014

Tags: s&p 500, biggest stock market index, what is the s&p 500, s&p 500 sectors, stock market index,

In comparison with many international stock markets, the Top 40 Index of the Johannesburg Stock Exchange is small fry.

You just have to look at the main indices in the UK and the US to see how large stock market indices can really be.

The S&P 500 is the biggest stock market index in the world. And that’s why investors and traders pay so much attention to what it does. Chances are if it starts to fall, other market will follow suit.

So what makes up the S&P 500?

Let’s take a closer look…

What is the S&P 500?

The S&P 500 consists of the 500 largest companies in the US that have listings on the New York Stock Exchange and the NASDAQ.

This makes it the biggest stock market index in the world. And the main stock market index of the world’s largest economy.

Whatever happens on the S&P 500 tends to set the tone for what might be in store for the rest of the world’s stock markets.

What makes up the S&P 500?

The S&P 500 has a large proportion of cyclical firms. That means these companies are sensitive to what happens in the economy. These companies make up 72% of the index.

For a developed market, that’s a pretty high proportion. And because of the heavy weighting of cyclical companies, the S&P 500 can be a pretty volatile index.

Have a look at the chart below of the sectors in the S&P 500…

Sectors of the S&P 500

The sectors for the S&P 500

The largest sector is financials. This makes up 17.28% of the index. The technology sector isn’t far behind, making up 16.97%.

Consumer services, which includes retail, media, and travel and leisure firms, makes up 12.73% of the index. And industrials hold 11.47%. Oil and gas companies make up 9.55% of the index.

These are all the cyclical companies included in the S&P 500.

The defensive sectors of the S&P 500 are healthcare and consumer goods. These make up 13.15% and 10.27% respectively.

So there you have it. A delve into the world’s biggest stock market index.

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