The S&P 500: America's Stock Market Benchmark

What is the S&P 500?

The S&P 500 (Standard & Poor's 500) is an index of the 500 largest publicly traded companies in the United States by market capitalization. It represents approximately 80% of the total market value of all U.S. stocks, making it the most accurate representation of the American stock market. The index is managed by S&P Dow Jones Indices and includes companies from all sectors of the economy.

The main ticker symbols for S&P 500 investments are:

• SPY: The SPDR S&P 500 ETF (most popular, largest volume)
• IVV: iShares Core S&P 500 ETF
• VOO: Vanguard S&P 500 ETF
• ^GSPC: The S&P 500 Index itself (not traded directly)

How is the S&P 500 Calculated?

The S&P 500 is a market-capitalization-weighted index, meaning larger companies have a greater influence on the index's movements. If Apple's market cap is double that of another company in the index, a 1% change in Apple's price has twice the impact on the overall index. This weighting ensures the index accurately reflects the overall market's performance.

Composition and Sectors

The S&P 500 includes companies across all major economic sectors. Here's the approximate sector breakdown:

Pie chart showing the approximate sector breakdown of the S&P 500 index.

Historical Performance

Since its inception in 1957, the S&P 500 has delivered strong long-term returns averaging approximately 10% annually. The index has weathered numerous market crashes—including the Great Depression, the 2008 financial crisis, and the 2020 COVID-19 crash—and recovered each time. This resilience demonstrates the strength of diversification across 500 major companies.

Interactive chart showing S&P 500 historical performance. Hover for details, use the toolbar to zoom or pan.

Why Investors Track the S&P 500

Market Indicator: The S&P 500 is considered the primary gauge of U.S. economic health. When the S&P 500 rises, it indicates confidence in corporate earnings and economic growth. When it falls, it signals concerns about the future.

Benchmark for Performance: Professional investors, hedge funds, and mutual funds use the S&P 500 as their benchmark. If a fund manager claims to beat the market, they're usually comparing against S&P 500 returns.

Diversification: Investing in an S&P 500 ETF like SPY gives you exposure to 500 large, stable companies with a single purchase, providing built-in diversification that reduces risk.

Low Volatility Relative to Individual Stocks: Because it represents 500 companies, the S&P 500 experiences less dramatic price swings than individual stocks, making it suitable for long-term investors.

The 200-Day SMA Strategy on the S&P 500

This website uses the 200-day Simple Moving Average (SMA) to track S&P 500 trends and generate buy/sell signals. The strategy is simple:

• BUY Signal: When SPY rises above its 200-day SMA, invest in SPXL (3x leveraged S&P 500 ETF)
• SELL Signal: When SPY falls below its 200-day SMA, move to cash to preserve capital

This systematic approach aims to capture long-term uptrends while avoiding major downturns. Extensive backtesting shows it can reduce drawdowns by 40-50% compared to buy-and-hold investing, while still capturing most of the gains.