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S&P 500 Index (US500 CFD)

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Axi Symbol: US500

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The Financing Reference Rate: US Fed Funds Upper Target

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3 Day Financing: Friday

Long Position Overnight Fee: displayed on the trading platform

Short Position Overnight Fee: displayed on the trading platform

Pricing is indicative. Past performance is not a reliable indicator of future results. Client sentiment is provided for general information only, is historical in nature and is not intended to provide any form of trading or investment advice - it must not form the basis of your trading or investment decisions.

What is the S&P 500 index?

The Standard and Poor's 500 index, or simply the S&P 500, is one of the most widely recognised and quoted stock market indices in the world. It tracks the performance of 500 large and well-established publicly traded companies listed on major US stock exchanges, such as the New York Stock Exchange (NYSE) and the NASDAQ.

The selection of companies in the S&P 500 is done by a committee, which aims to include a representative sample of the US economy across various sectors. These companies collectively represent a sizeable portion of the overall market capitalisation of the US stock market. Well-known companies in the index include Apple, Amazon, Microsoft, Meta (Facebook), Alphabet (Google), Johnson & Johnson, Tesla, Coca-Cola, Visa, McDonalds, Walmart, Nike, and Disney.

The S&P 500 is a market-capitalisation-weighted index, which means companies with a higher market cap have a more significant impact on the index's performance compared to companies with lower market capitalisations.

The importance of the S&P 500 can be attributed to several factors, including:

  • Broad representation: The S&P 500 covers a diverse range of sectors and industries, including technology, finance, healthcare, and energy. As a result, it provides investors with a broad representation of the US economy's performance.
  • Market performance benchmark: The index serves as a benchmark for evaluating the overall performance of the US stock market. Many financial professionals, including traders, fund managers, and analysts, use the S&P 500 as a reference point.
  • Investor sentiment indicator: The movements of the S&P 500 can indicate the general sentiment and confidence of investors in the US economy. When the index rises, it often reflects positive investor sentiment, and conversely, a decline can indicate a more cautious or bearish outlook.
  • Economic indicator: The performance of the S&P 500 is often seen as a leading indicator of economic health. As the index includes a considerable number of companies with operations across the US, its movements can reflect broader economic trends.
  • Global impact: The S&P 500's influence extends beyond US borders, as it is closely monitored by investors and policymakers around the world. Its performance can impact global financial markets and investor sentiment in other countries.

Overall, the S&P 500 serves as an essential tool for traders, investors, economists, and other financial professionals to gauge the health of the US economy and make informed investment decisions.

S&P 500 historical Performance

The S&P 500 index, introduced by Standard & Poor's (S&P) in 1957, has roots dating back to the 1920s when the Standard Statistics Company began publishing stock market indices. Over time, it firmly established itself as the go-to benchmark for measuring the performance of the US stock market and the overall health of the US economy, a status it maintains to this day.

Remarkably, the S&P 500 has sustained a consistent long-term uptrend. If you had invested $100 in the index at its inception in 1957, that investment would have grown to $65,980 by September 1st, 2023, assuming all dividends were reinvested. This impressive return represents a staggering 65,880 percent gain or an average annual return of 10.25%.

Despite its reputation for stability, the S&P 500 has weathered significant crashes and extended downturns throughout its history:

  • In 1973–74, a major correction struck the S&P 500 due to the oil crisis and rapidly rising inflation.
  • On October 19, 1987, the index suffered a sudden and dramatic crash, shedding over 20% of its value in a single day, a day now remembered as "Black Monday."
  • The early 2000s witnessed the bursting of the dot-com bubble, causing the S&P 500 to plummet by 50%.
  • In 2007, the global financial crisis began, leading to a major correction that wiped out more than half of the index's value within 18 months.
  • The COVID-19 pandemic triggered another substantial crash, although this correction was short-lived, with the S&P 500 already showing signs of recovery within several weeks.

What affects the price of the S&P 500 index?

The price of the S&P 500 index is influenced by a combination of factors that reflect the overall health and performance of the underlying companies and the broader economy. Some of the main factors that affect the price of the S&P 500 include:

  • Corporate earnings: The collective earnings and profitability of the 500 companies in the index have a major impact on the index's price. Strong corporate earnings drive the index higher, while weak earnings can lead to declines.
  • Economic indicators: Economic indicators like Gross Domestic Product (GDP) growth, employment data, inflation rates, consumer sentiment, and manufacturing data can influence investor sentiment and market direction, thereby impacting the performance of the S&P 500.
  • Interest rates: Changes in interest rates set by central banks, such as the US Federal Reserve, can affect borrowing costs, consumer spending, and corporate profitability, influencing the index's performance.
  • Market sentiment: Investor sentiment, the market’s appetite for risk, and confidence play a crucial role in determining stock prices and, consequently, the S&P 500 price. Positive sentiment often leads to rising stock prices, while negative sentiment can result in declines, and this flows onto the index price.
  • Global events: Geopolitical events, trade tensions, and global economic conditions can impact the S&P 500, especially since many of the index's constituents have significant international operations.
  • Monetary policy: US Federal Reserve decisions, such as quantitative easing or tightening, can affect liquidity and financial market conditions, influencing the performance of the S&P 500.
  • Fiscal policy: Government policies, including tax changes, infrastructure spending, and stimulus measures, can have both direct and indirect effects on the index's price.
  • Industry performance: The performance of specific industries and sectors within the S&P 500 can affect the index's overall price. Positive developments in certain sectors may lift the index, while downturns in key industries can weigh it down.
  • Market capitalisation changes: As the S&P 500 is a market-cap-weighted index, changes in individual company market capitalisations can affect the index's overall performance. Larger companies have a more significant impact on the index's price movements.
  • Technological advancements: Advances in technology that affect constituent firms can affect market dynamics and the S&P 500 price, especially in the short term.
  • Corporate mergers and acquisitions: Significant mergers, acquisitions, or spin-offs involving S&P 500 companies can impact the index's composition and performance.

What to watch out for when trading the S&P 500 index?

When trading the S&P 500 index, it is crucial to keep a close eye on various market events and significant announcements that can have an impact on the index's price and overall market sentiment. Here are some key factors to watch for:

  • Corporate earnings reports from S&P 500 listed companies, e.g., Apple, Microsoft, Tesla, Coca-Cola, Walmart, and Disney
  • Monetary policy announcements from the US Federal Reserve
  • US interest rate decisions
  • US GDP data
  • US non-farm payrolls figures
  • US manufacturing Purchasing Managers' Index (PMI)
  • US Trade Balance numbers
  • US retail sales data
The data is sourced from third-party providers. This information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. It has been prepared without taking your objectives, financial situation, or needs into account. Any references to past performance and forecasts are not reliable indicators of future results. Axi makes no representation and assumes no liability regarding the accuracy and completeness of the content in this publication. Readers should seek their own advice.

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