Standard & Poor's 500

Standard & Poor's 500
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Name	S&P 500
Type	Stock market index
Founded	1957
Owner	S&P Dow Jones Indices
Area served	United States
Industry	Financial services

Standard & Poor's 500 is a widely followed stock market index tracking 500 large-cap companies in the United States, often used as a barometer for U.S. Dow Jones Industrial Average, Nasdaq Composite, Russell 1000, Wilshire 5000, MSCI World Index. It influences benchmark setting for Vanguard Group, BlackRock, State Street Corporation, Fidelity Investments, Charles Schwab Corporation and underpins many exchange-traded funds linked to indices created by S&P Dow Jones Indices. Investors and policymakers such as Federal Reserve System, U.S. Treasury Department, Securities and Exchange Commission monitor its movements alongside events like the Black Monday (1987), 2008 financial crisis, COVID-19 pandemic in the United States.

History

The index was introduced in 1957 by Standard & Poor's, a successor to earlier composite indices compiled by Poor's Publishing and influenced by methodologies from Cowles Commission and analysts at Merrill Lynch. Developments in its history parallel episodes including the Great Depression, World War II, Oil crisis of 1973, Dot-com bubble, Global financial crisis of 2007–2008, European sovereign debt crisis, and regulatory reforms such as the Securities Exchange Act of 1934. Ownership and calculation advances migrated through entities including McGraw-Hill Companies and the joint venture forming S&P Dow Jones Indices, interacting with exchanges like New York Stock Exchange, NASDAQ, American Stock Exchange and clearinghouses such as Depository Trust & Clearing Corporation. Market structure shifts tied to innovations by firms like Goldman Sachs, Morgan Stanley, JP Morgan Chase, and instruments from Barclays and Deutsche Bank shaped index-linked products over decades.

Composition and methodology

Constituents are chosen and weighted through rules maintained by S&P Dow Jones Indices with governance from committees including representatives of Standard & Poor's and industry practitioners. Selection criteria reference market capitalization thresholds similar to constituents of the Russell 3000, liquidity measures used by NYSE Arca, free-float adjustments practiced by MSCI, and sector classification via the Global Industry Classification Standard. Weighting is market-capitalization-based with float adjustments akin to conventions used by FTSE Russell and MSCI Inc., and rebalancing occurs regularly alongside corporate actions handled in coordination with firms such as Apple Inc., Microsoft, Amazon.com, Alphabet Inc., ExxonMobil and Johnson & Johnson. Methodological debates have drawn comparisons to equal-weighted proposals championed by academics at Harvard University, University of Chicago, Columbia University, and practitioners at institutions like Wellington Management.

Market performance and indices derived from the S&P 500

The index has spawned derived series including total-return versions, sector indices aligned to the Global Industry Classification Standard, volatility benchmarks referenced against instruments from Cboe Global Markets and numerous derivative contracts listed by Chicago Mercantile Exchange and Intercontinental Exchange. Performance episodes have been contextualized by macro events such as the Nixon Shock, Stagflation of the 1970s, and policy moves by Federal Open Market Committee decisions, with academic analyses from National Bureau of Economic Research, Brookings Institution, Peterson Institute for International Economics and commentators at The Wall Street Journal and Financial Times. Historical returns are compared with alternatives like the S&P SmallCap 600, Dow Jones Industrial Average, MSCI Emerging Markets, and benchmarks used by asset managers including PIMCO and Bridgewater Associates.

Investment products and usage

A wide array of investment products track the index: mutual funds from Vanguard Group and Fidelity Investments; ETFs sponsored by State Street Global Advisors (famous issuer of SPDR funds), Invesco, iShares (BlackRock); index futures and options traded on CME Group and Cboe Global Markets; and structured products offered by banks such as Citigroup, Bank of America Merrill Lynch, Credit Suisse. Portfolio managers at T. Rowe Price, Capital Group, Franklin Templeton Investments use the index for benchmark comparisons, while pension funds like CalPERS, sovereign wealth funds such as Norwegian Government Pension Fund Global and endowments at Yale University and Harvard University reference it in asset allocation. Retail platforms including Robinhood Markets, E*TRADE, Interactive Brokers provide access to ETFs and derivatives linked to the index.

Criticism and limitations

Critics from academic institutions including London School of Economics, Stanford University, New York University highlight concentration risk toward mega-cap companies such as Apple Inc., Microsoft, Amazon.com, Alphabet Inc., and Meta Platforms and the resulting sector biases often compared to equal-weighted or fundamental-weighted indices debated by Eugene Fama and Kenneth French. Methodology critics point to potential conflicts associated with index provider governance similar to issues raised about Moody's Investors Service and Fitch Ratings, and to representational questions when comparing to broader aggregates like the Wilshire 5000 or international measures from MSCI Inc. and FTSE Russell. Additional limitations noted by commentators at Bloomberg L.P., Reuters, The Economist include survivorship bias, corporate actions handling (mergers involving AT&T, Time Warner), and the impact of passive investing on price discovery debated by scholars at Princeton University and policy analysts at International Monetary Fund.

Category:Stock market indices