What is the S&P 500 index?
The S&P 500 (Standard & Poor’s 500) is a stock index comprising the five hundred largest US publicly traded companies. The S&P 500 is one of the most important stock indices in the world, and is considered the best measure of large capital stocks in America.
The index performance chart shows the highest and lowest values of the US economy. It was first published in 1923. It is currently attacking record values.
What affects the current stock market?
It’s not just the S&P 500 that is growing. The Dow Jones index, which includes shares of 30 prominent US companies, gained 1.05 percent this week and closed at 27,976.84 points. The Nasdaq then rose 2.13 percent to 11,012.24 points.
“Most people expected stock markets to rise. Coronavir markets fell because no one knew what would happen. When it became clear that the pandemic would sometimes pass, uncertainty began to dissolve and the markets began to grow again, “says Petr Bartoň, chief economist of the Natland investment group.
Was it just panic?
No, the crisis has also attracted new investors who have not yet been listed on the stock exchange. Whereas previously they could have expected a profit of four or five percent, now profits could climb up to tens of percent. Equally important was the assistance of governments and central banks through financial assistance and large amounts of money in circulation. “Where else but on the stock market should the money be, especially when it is still not rosy with investment opportunities. Before you invest in real things, and it will take a year, send money to the stock market, especially when interest rates are low, “Bartoň explains the growth.
Who is pulling the stock market up?
Not only this week, technology companies such as Amazon, Microsoft, Apple or Tesla succeeded on the stock exchange. It is now safer for investors to buy shares of large companies, which regularly emerge from crises much better. On the one hand, they are much more likely to survive the crisis, and on the other hand, their shares sell well at virtually any time.
“In the late stages of the cycle, that is, after long growths, the smaller ones are more successful, because large companies are already ‘lazy and exhausted’, while small ones are growing all the more. They are trying to find something special with which they could succeed in the market. During a crisis, the bigger ones tend to be more resilient and, on the contrary, the smaller ones often disappear completely, “points out the chief economist of the Natland group.
When did S&P experience a historic slump?
The index experienced its first major decline a few years after its introduction during the Great Depression. From the peak of August 1929, it fell (with fluctuations, of course) until mid-1932. At the same time, it lost 86 percent of its value.
Since then, the index has not experienced such a drastic and long-lasting decline. The last deep decline was recorded in the index at the end of the last decade. During the financial crisis, the index fell from 1,550 points to just around 675 points. The return to the original high level took almost six long years.
The average recovery time and return to record numbers is then based on 1,447 business days. The fastest in history, according to the Dow Jones Market Data, managed to return the S&P index to record numbers between 1966 and 1967. It took 310 trading days.
2020: Anomalies with a large A?
The index rose to its highest values on February 19 this year, specifically to 3,386 points. During the month, he experienced a drop due to coronavirus measures by more than 1,148 points.
However, the sharp fall was followed by rapid and regular growth, which attacks the aforementioned record in the number of trading days when the index returned to its original values. And it doesn’t look like a fall right now.
“I don’t see much reason why it shouldn’t keep going. Now there is a lot of money flying here waiting to go for green investments, for example. Until then, they will be parked on the stock exchange and its growth can continue for quite some time. There are now fewer and fewer real possibilities for value for money, which is why everything is headed there, ”notes Petr Bartoň.
At the same time, there is still talk of the deep financial crisis affecting the United States, in which the S&P index is based. As many as 16 million people are out of work, mainly due to coronavirus, the unemployment rate is around 10 percent. In addition, state financial support has ended and negotiations in Congress for its continuation are still ongoing.
But the stock market sees the world differently…