In every great double act, there will usually be one partner who, however slightly, outshines the other. Maybe they have the snappier name, or the better lines, or perhaps they are more deeply embedded in the public consciousness.
The relationship between America’s premier equity indices – the Dow Jones Industrial Average and the S&P 500 – can be seen in this way. When stock prices are discussed, “the Dow” seems to trip off the tongue in a way that “the S&P” never quite does.
Yet while the Dow is deeply redolent of Wall Street tradition, many believe the broader-based S&P price is more representative of the state of US equity markets at any one time. Anyone serious about trading American stocks cannot ignore the S&P 500.
A good 12 months for stocks
However, any rivalry is limited by two important factors. One is that the S&P contains within its 500 member-stocks all the 30 constituents of the Dow.
The other is that both are owned by the same company, S&P Dow Jones Indices.
Perhaps a third factor is that, with the high and wide bull market that has, to date, accompanied the Donald Trump presidency, there is plenty of action in both indices.
There has been steady progress during the past three months, with the S&P rising from 2,643.85 on 29 January and the level of the Dow increasing from 24,579.96.
Both indices suffered a vertiginous plunge on 24 December, to 2,351.10 for the S&P and 21,792.19 for the Dow. But this proved to be a temporary setback, and both are now trading at well above their levels of a year ago, 2,669.90 on 30 April 2018 for the S&P and 24,163.15 on the same day for the Dow.
The S&P 505?
Across the last five years, from 2 May 2014, progress has been little short of spectacular. The S&P then stood at 1,881.14 and the Dow at 16,512.89.
Much of the S&P reads, as one would expect, like a who’s who of corporate America. There are industrial groups including 3M, Boeing and General Motors, consumer products giants such as Kellogg and Procter & Gamble, tech groups including Apple, IBM and AT&T, consultant Accenture, luxury goods group Estee Lauder, financial services colossus American Express and retailer Wal-Mart.
But there is room also for less-known businesses: Synopsys in IT, for example, and Tapestry in clothing and luxury goods.
For this reason, the S&P 500 is actually the S&P 505, although for simplicity’s sake the round number of 500 is retained for everyday use.
They may notice also that the third great US exchange, the tech-heavy Nasdaq, is an S&P constituent. Not so long ago, the idea of one exchange being listed on another seemed far-fetched.
Today, it passes without comment.
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