Infographic: What is a Stock Market Index?
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What is a Stock Market Index?

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What is a Stock Market Index?

What is a Stock Market Index?

“How did the stock market do today?”

At surface, this seems like a simple question – but it’s also deceptively difficult to answer. The market can be defined as many different things, and there are actually over 100,000 publicly traded companies in the world to choose from.

Luckily, the use of a stock market index can help define a particular market, as well as track its performance in a way that is easy to reference.

Types of Indices

Today’s infographic from StocksToTrade.com defines a stock market index as a thermometer that measures the health of a group of stocks. When this particular group of stocks changes in value, the index follows it along.

A stock market index can track a group of stocks based on several different factors:

Global: Some indices, such as the MSCI All-Country World Index, aim to be a proxy for all global equities.

Regional Geography: A stock market index can also track a specific region, such as Europe. As an example, the EURO STOXX 50 tracks the performance of the largest and most liquid 50 stocks in the Eurozone.

National: Indices can also serve as a proxy for the performance of an entire country’s equities. The FTSE 100 in the United Kingdom tracks the 100 largest companies traded, which total to 81% of the total market capitalization of the exchange.

Industry: A stock market index can try to track the performance of an industry as a whole. The GDXJ, for example, is an ETF based on an underlying index that tracks the performance of smallcap mining companies focused on gold and silver.

Exchange: Indices also are used for specific exchanges. The S&P/TSX Venture Composite Index, for example, is used to represent the performance of companies that trade on the TSX Venture exchange in Canada.

Main Indices in the U.S.

Last year we did a graphical primer of the differences between the main indices and exchanges in the U.S., but we’ll summarize the major indices here as well.

S&P 500: First calculated in 1923, the S&P 500 covers the largest companies on the NYSE and Nasdaq exchanges in the United States, and represents $21.4 trillion in value.

Dow Jones Industrial Average: The DJIA is a price-weighted index of 30 significant companies traded on the NYSE and Nasdaq. It has a market capitalization of approximately $6 trillion, and was founded back in 1885.

Nasdaq Composite: Used more as a proxy for the technology industry, this index tracks 3,000 equities on the Nasdaq exchange, worth $6.8 trillion. It does include some companies not located in the U.S.

Interested in learning more about exchanges and indices? See the 20 largest stock exchanges in the world.

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Markets

The Top Google Searches Related to Investing in 2022

What was on investors’ minds in 2022? Discover the top Google searches and how the dominant trends played out in portfolios.

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Trend lines showing when the top Google searches related to investing reached peak popularity over the course of 2022.
The following content is sponsored by New York Life Investments

The Top Google Searches Related to Investing in 2022

It was a turbulent year for the markets in 2022, with geopolitical conflict, rising prices, and the labor market playing key roles. Which stories captured investors’ attention the most? 

This infographic from New York Life Investments outlines the top Google searches related to investing in 2022, and offers a closer look at some of the trends.

Top Google Searches: Year in Review

We picked some of the top economic and investing stories that saw peak search interest in the U.S. each month, according to Google Trends.

Month of Peak InterestSearch Term
JanuaryGreat Resignation
FebruaryRussian Stock Market
MarchOil Price
April Housing Bubble
MayValue Investing
JuneBitcoin
JulyRecession
AugustInflation
SeptemberUS Dollar
OctoberOPEC
NovemberLayoffs
DecemberInterest Rate Forecast

Data based on exact searches in the U.S. from December 26, 2021 to December 18, 2022.

Let’s look at each quarter in more detail, to see how these top Google searches were related to activity in the economy and investors’ portfolios.

Q1 2022

The start of the year was marked by U.S. workers quitting their jobs in record numbers, and the effects of the Russia-Ukraine war. For instance, the price of crude oil skyrocketed after the war caused supply uncertainties. Early March’s peak of $125 per barrel was a 13-year high.

DateClosing Price of WTI Crude Oil
(USD/Barrel)
January 2, 2022$76
March 3, 2022$125
December 29, 2022$80

While crude oil lost nearly all its gains by year-end, the energy sector in general performed well. In fact, the S&P 500 Energy Index gained 57% over the year compared to the S&P 500’s 19% loss.

Q2 2022

The second quarter of 2022 saw abnormal house price growth, renewed interest in value investing, and a bitcoin crash. In particular, value investing performed much better than growth investing over the course of the year.

IndexPrice Return in 2022
S&P 500 Value Index-7.4%
S&P 500 Growth Index-30.1%

Value stocks have typically outperformed during periods of rising rates, and 2022 was no exception.

Q3 2022

The third quarter was defined by worries about a recession and inflation, along with interest in the rising U.S. dollar. In fact, the U.S. dollar gained against nearly every major currency.

Currency USD Appreciation Against Currency
(Dec 31 2020-Sep 30 2022)
Japanese Yen40.1%
Chinese Yuan9.2%
Euro25.1%
Canadian Dollar7.2%
British Pound22.0%
Australian Dollar18.1%

Higher interest rates made the U.S. dollar more attractive to investors, since it meant they would get a higher return on their fixed income investments.

Q4 2022

The end of the year was dominated by OPEC cutting oil production, high layoffs in the tech sector, and curiosity about the future of interest rates. The Federal Reserve’s December 2022 economic projections offer clues about the trajectory of the policy rate.

 202320242025Longer Run
Minimum Projection4.9%3.1%2.4%2.3%
Median Projection5.1%4.1%3.1%2.5%
Maximum Projection5.6%5.6%5.6%3.3%

The Federal Reserve expects interest rates to peak in 2023, with rates to remain elevated above pre-pandemic levels for the foreseeable future.

The Top Google Searches to Come

After a year of volatility across asset classes, economic uncertainty remains. Which themes will become investors’ top Google searches in 2023?

Find out how New York Life Investments can help you make sense of market trends.

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