HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

US Stock Indices: The Past and the Present


There is a saying in the world of finance: "America will sneeze, but the whole world will catch a cold." But what is the way to determine how serious the cause of this sneezing is - is it from a slight discomfort, or a serious illness? This is what stock/exchange indices were invented for. The main ones that can be used to diagnose the health of the US economy are presented in the NordFX line of trading tools. These are  Dow Jones 30 (DJ30.c), S&P 500 (US500.c) and NASDAQ-100 (USTEC.c). Let's consider each of them.                                                                     

Dow Jones: "Grandfather" of the US Economy

The Dow Jones Industrial Average was developed back in 1884 by Charles Dow, the founder of The Wall Street Journal and the creator of the Dow theory. The index initially had a limited range of users and included only 11 stocks (9 railway and 2 industrial). It was calculated as the arithmetic average of the value of the shares included in its basket. The Dow Jones became public only 12 years later, in May 1896.

Dow Jones currently is not one, but a whole family of various indices that record not only the dynamics of the shares of various companies, but also, for example, real estate (Dow Jones Real Estate), transport companies (Dow Jones Transportation Average), utility companies (Dow Jones Utility Average) and so on.

In addition to the dynamics of US stocks, the Dow Jones family of indices track global trends (Dow Jones Global Titans 50), as well as the state of the economies of individual countries (Dow Jones Turkey Titans 20, Dow Jones Italy Titans 30, Dow Jones South Korea Titans 30, Dow Jones Africa Titans 50, etc.).

The most famous of this large group is the Dow Jones Industrial Average index, otherwise the Dow Jones 30, which is represented among NordFX trading instruments. Its basket includes 30 shares of the largest companies. As for the full name, the “Industrial Average” is rather a tribute to history, since other sectors of the economy now coexist in the index next to the industrial one. At the moment, the percentage "pie" looks like this: technology companies - 26.28%, consumer goods - 25.81%, healthcare - 14.66%, industrial goods - 13.95%, financial sector - 13.26%, energy - 3.40%, telecommunications - 1.46%, raw materials industry - 1.09%, and the rest - 0.09%.

The Dow Jones 30 includes shares of companies such as Apple, Goldman Sachs Group, Boeing, Johnson & Johnson, Microsoft, Procter & Gamble, which are also available to NordFX clients. Combining trades on both these individual assets and stock indices in their strategies, traders can hedge risks and make larger profits.

One of the main differences between the Dow Jones 30 and many other indices is that there are practically no strict rules for companies to enter its basket. But if you look at its composition, you can see that it includes world-class companies whose names are well known to everyone. This index can be considered a ready-made investment portfolio consisting of "blue chips". And what about chips? This name comes from casinos, where tokens of exactly this color are traditionally the most valuable. In the financial world, this is the name given to the shares of the largest, liquid and reliable companies with stable profitability. This is what distinguishes the Dow Jones 30 from, for example, the S&P 500, an index that includes a much larger number of companies, many of which are still in a phase of active growth.

S&P 500: Entire US Economy in One Index

Next in the list of the most well-known and popular indices is the S&P 500. Its basket includes the top 500 US public companies traded on stock exchanges. On the one hand, this is very few: after all, shares of about 7-8 thousand various companies are traded on the country's stock exchanges. But on the other hand, when compared with the Dow Jones 30, this is a lot. Moreover, these 500 companies make up 80% of the capitalization of the entire US stock market. Thus, the dynamics of the S&P 500 reflects the state of almost the entire US economy.

The same “blue chips” like Microsoft, Apple, Amazon, Facebook, Coca-Cola, Visa, Mastercard and McDonalds can be found in the index portfolio. But, as already mentioned, there are many relatively new companies in it that do not have a deep investment history. The first 10 companies from the S&P 500 list account for 25% of its total weight, the TOP-15 - about 30%, while the share of companies from the last hundred is measured in hundredths and even thousandths of a percent - 0.05%, 0.03% or 0.01%. That is, the weight of Microsoft or Apple is comparable to the total weight of several dozen companies from the bottom of the list.

The index has been published since March 4, 1957. The list is owned and maintained by Standard & Poor's. (Standard & Poor's, along with Moody's and Fitch Ratings, is one of the "Big Three" of the most influential international rating agencies involved in analytical research of financial markets).

NASDAQ-100: Most Technologically Advanced Hundred

The third index, the NASDAQ-100, includes the 100 largest companies by capitalization, mostly from high-tech industries, from the United States and other countries whose shares are traded on the US Nasdaq Stock Exchange.

At the moment, the NASDAQ family has more than 10 different indices, the history of which began in 1985. Then two new indices were introduced: NASDAQ-100 and NASDAQ Financial-100. Industrial high-tech companies were included in the first index, financial companies were included in the second one. These indices were divided  in order to avoid the influence of the financial environment on the technology segment. This was possible, but only partially.

If you look at the charts, you can see the correlation of the NASDAQ-100 with both the Dow Jones 30 and the S&P 500. This is understandable, since its basket includes such “whales” of the stock market as Facebook, PayPal, Google, Yahoo, eBay, Amazon, Pepsi and many other world-famous companies.

Indices and Cryptocurrency Market

Summing up, it should be noted that the shares of companies, no matter how large these companies are, are traditionally classified as risky assets, unlike, for example, US government bonds or gold used to store capital, especially during periods of financial crises. . And in this context, we cannot but mention blockchain and digital assets, which in recent years have become an integral part of the high-tech sector. That is why, especially in late 2021 and early 2022, there was a strong correlation between the quotes of the leading cryptocurrencies, bitcoin, ethereum, etc., with the Nasdaq 100 and S&P 500 indices. Thus, monitoring these indices allows you to improve the quality of forecasting and predict the moment when the main trends in the crypto market change, more accurately. Although, it also happens vice versa: there have been cases when the reaction of digital assets was ahead of the reaction of other risky assets. 

#source


RELATED

How to make money on meme stock?

Meme stocks are shares that gained popularity and achieved a cult-like following on social media. As a result, private investors in online communities can create hype and influence the price of individual shares...

Warren Buffett’s Portfolio: Stocks Berkshire Hathaway Is Buying

Billionaire Warren Buffett runs the Berkshire Hathaway fund. It is the leading investment fund in the entire US. And it’s all due to the business acumen and iron fist of one of the most...

Forex vs Stocks: Differences, Similarities, and Which to Choose

The forex markets and the stock markets are two popular choices for investors and traders seeking to capitalise on market opportunities. While both markets offer potential for returns...

Blockchain Beyond Cryptocurrencies

Blockchain has become one of the most influential technologies after being one of the key elements supporting digital currencies. It is the technology...

The Effective Use of Technical Indicators

Technical traders often compute and plot mathematical quantities based on market observables like price and volume in order to indicate the past or present state of the market...

Advantages and disadvantages of forex rebate

If you are really concerned about your profit on the forex market you should definitely use one of the mayor forex rebate providers...

How to Trade Copper: A Comprehensive Guide

Copper is a widely used hard commodity that finds applications in various sectors, including technology, construction, plumbing, and wiring. While it may be less expensive...

Step-by-step guide about bitcoin trading

When Satoshi Nakamoto created bitcoin in 2009, nobody taught it would be a worthy coin, let alone being recognized and accepted as a means of transaction worldwide...

Cardano vs. Solana: Which one is the Better Investment?

Cardano and Solana have captured the imagination of crypto enthusiasts in the last few years, rising with the previous bullish run of crypto. The two cryptocurrencies...

Mastering Bond Trading in 2024: A Comprehensive Guide

Bonds, often referred to as fixed income securities, continue to play a pivotal role in the financial landscape, serving as a fundamental instrument for governments and corporations to raise capital for various ventures...

What Is Shiba Inu Coin?

Shiba Inu coin is a “meme coin” that caught the attention of crypto enthusiasts over the last few years. The coin is one of the largest of the "dog coins" and a direct competitor to Dogecoin...

Ten Tips to becoming a Forex Trader

Getting started in forex has never been simpler. Easier access to currency markets and brokerage platforms that fit a range of trading needs has become widely prevalent...

How to make money trading Bitcoin

The question "how to make money with bitcoin" has awakened an acute interest of forex traders. Usually the answer is associated with the purchase

Cardano: What Price Will the Peer-Reviewed Crypto Reach?

Cardano was late to the crypto market compared to many others, but the altcoin crypto asset is brimming with innovation, giving it incredible projected...

How Is the Bitcoin Price Determined?

To be a profitable trader of Bitcoin (BTC), you need to understand what determines the Bitcoin price. The markets are much like many others, as they need to consider the supply and demand and adoption issues when it comes to BTC...

What Is the S&P 500 and how to trade it?

The Standard & Poor's 500 Index, known by its shorthand as the S&P 500, is arguably the most important stock index in the world. It's made up of 500 companies, including many of the largest...

A Guide To Risks In DeFi: Are Exploits A Sign DeFi Is Still Too Risky?

At first glance, decentralized finance, called DeFi for short, is the next big thing in finance, ready to replace traditional banks and financial services that have been around...

How did investors survive the crises of past decades?

The world indexes have never fallen so quickly and strongly before. The financial crisis that has begun is unique for its trigger - it was caused by a virus COVID-19...

Solana vs. Ethereum: Which one is the Better Investment?

Understanding the difference between Solana and Ethereum can give you an insight into how to invest in both. When debating Solana vs. Ethereum, you should understand...

Libertex: How to invest in crude oil

Crude oil prices are affected by perceived shortages, excess supply and weather conditions, among other things. In addition, the price of oil is often considered one of the main benchmarks...

FP Markets information and reviews
FP Markets
81%
RoboForex information and reviews
RoboForex
77%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.