Posts filed under “Markets”
The Standard & Poor’s 500 Index is market-capitalization weighted, meaning that companies with higher stock-market valuations have a bigger influence on the index. There has been a cottage industry of criticism about this structure. Recently, it has led to a new world of fundamental indexing and so-called smart beta, or seeking ways of using the components of the index to outperform the index itself.
The S&P 500 wasn’t always set up this way. This is a good time to think about the subject, because today marks the anniversary of the index’s overhaul, giving us the structure we have now.
According to the S&P 500 2001 Directory (hat tip to Jason Zweig’s This Day in Financial History), the benchmark index for large cap U.S. stocks looked very different than it did before this day in 1988.
Back then the index was made up of:
400 industrial stocks
This seems like it was an effort to mimic Dow Jones, which had three big indexes — the Industrial Average, the Transportation Average and the Utilities Average. According to the Dow Jones Industrial Average Fact Sheet, the Industrial Average was designed “to represent large and well-known U.S. companies, cover[ing] all industries with the exception of Transportation and Utilities.” Having been around since the late-19th century, it had become the benchmark for measuring the U.S. stock market.
Continues here: The S&P 500′s Dubious Anniversary
Succinct Summations week ending April 3rd Positives: 1. Initial jobless claims fell to 268k, the lowest level in 15 years. 2. Euro-area economic sentiment rose to 103.9, the highest level in nearly four years. 3. Pending homes sales increased 3.1%, the highest reading since June 2013 and above the 0.3% expected rise. 4. Personal income…Read More
Succinct Summations of week ending March 27th Positives: 1. Markit’s Eurozone PMI rose to 54.1, the highest levels since May 2011. 2. Consumer prices rose 0.2% in February, in line with expectations. 3. Initial jobless claims fell to 282k, 8k less than expected. 4. New home sales came in at an annualized rate of 539k…Read More
Joseph Saluzzi (jsaluzzi-at-ThemisTrading.com) and Sal L. Arnuk (sarnuk-at-ThemisTrading.com) are co-heads of the equity trading desk at Themis Trading LLC (www.themistrading.com), an independent, no conflict agency brokerage firm specializing in trading listed and OTC equities for institutions. Prior to founding Themis, Sal and Joe worked for more than 10 years at Instinet Corporation, pioneers in the…Read More
Succinct Summations for the week ending March 20th: Positives: 1. The S&P 500 had its first positive week since mid-February 2. The UK FTSE crossed 7,000 for the first time ever 3. Building permits rose 3% vs an expected rise of 0.5%. 4. The Fed removed “patient” and US stocks rose 1.2% 5. The S&P…Read More
When discussing bull and bear markets, it sometimes helps to think of them as coming in two distinct flavors: Short-term cyclical markets and long-term secular ones. Knowing one from the other isn’t always easy. A number of veteran market observers such as Raymond James’s Jeffrey Saut, technician Ralph Acampora, strategist Laszlo Birinyi and market historians…Read More