When investors talk about “the market,” more often than not, they’re really talking about the S&P 500.

But why does the SPX500 still command such influence, especially in 2025, when investors have more options than ever? And how are traders and wealth managers using it to anchor their portfolios in an era of shifting monetary policy, technological disruption, and geopolitical uncertainty?

Let’s take a closer look at the benchmark that refuses to be replaced.

How the S&P 500 Became the Market’s Compass

The S&P 500 was first introduced in 1957, a time when the U.S. economy was booming and global markets were steadily opening up. The idea was straightforward: build an index that captured the largest, most representative slice of American business.

Over time, the index evolved into more than just a basket of 500 companies. It became:

A global yardstick

Asset managers and hedge funds across continents measure themselves against it.

A confidence barometer

When U.S. equities rise, global risk appetite often follows.

A wealth creator

With dividends reinvested, the S&P 500 has historically delivered returns that rival almost any other asset class over the long term.

Today, the SPX500 is tracked by trillions of dollars through ETFs, mutual funds, futures, and CFDs. Few financial instruments have had such a profound influence on both professional and retail investing.

What’s Inside the Index?

The SPX500 is a market-capitalisation weighted index. That means the biggest companies carry the most influence. A swing in the share price of Apple or Microsoft moves the index far more than a regional utility company in the bottom quartile.

Key sectors include:

Technology

Often more than a quarter of the index weight.

Healthcare

Anchoring stability through pharmaceuticals and biotech.

Financials

Banks and insurers still form a critical layer.

Consumer discretionary and staples

A balance of cyclicality and defensiveness.

Energy and industrials

Though smaller than they once were, they remain economically sensitive bellwethers.

This diversification is why many investors consider the S&P 500 a proxy not just for the U.S. economy, but for global corporate growth. Roughly 40% of revenues for S&P 500 companies come from outside America, meaning the index is inherently international.

The Key Drivers Behind SPX500 Performance

What pushes the index higher or lower? Several factors tend to dominate…

Earnings Season

Corporate profits are the lifeblood of the index. Strong earnings surprises often fuel rallies, while weak guidance can send ripples across global markets.

Monetary Policy

The Federal Reserve’s decisions on interest rates directly affect valuations. A dovish Fed supports higher multiples, while tightening typically compresses them.

Inflation and Growth Data

CPI, GDP, and employment releases shape expectations for both corporate margins and central bank policy.

Geopolitical Shocks

From trade disputes to regional conflicts, global events can rapidly alter investor sentiment.

Sector Rotation

Sometimes the index moves not because of broad rallies, but due to money flowing from one sector to another, such as into defensive healthcare stocks during periods of uncertainty.

Understanding these dynamics is essential for anyone trading or investing in the SPX500.

Why Wealth Managers Still Anchor Portfolios to the S&P 500

For City professionals tasked with stewarding client assets, the S&P 500 offers three things that are hard to replicate:

Liquidity ✔️

You can enter or exit positions in seconds without significant slippage.

Transparency ✔️

Index composition and methodology are widely understood.

Track record ✔️

Decades of historical data provide confidence in backtesting and modelling.

These qualities make the index a cornerstone of model portfolios, pension funds, and sovereign wealth allocations. Even investors focused on alternative assets often benchmark their performance against the SPX500.

Accessing the SPX500 as a Trader

Not everyone wants to buy ETFs or accumulate stocks over years. Many traders prefer more flexible approaches. That’s where brokers like ThinkMarkets come in, offering access to the SPX500 through CFDs.

Key features include:

Extended trading hours

Capture moves outside of the New York session, especially when global news breaks.

Leverage

Amplify exposure without tying up large amounts of capital (though with increased risk).

Tight spreads

Keep costs predictable in active strategies.

Hedging potential

Use short positions to balance equity portfolios during downturns.

For active traders, CFDs on the SPX500 provide the tactical flexibility that long-only ETFs often lack.

Is the S&P 500 Still the Best Global Benchmark?

Sceptics sometimes ask whether other indices, such as MSCI World, Euro Stoxx 50, or even emerging market benchmarks, might be more representative of today’s economy.

Yet the S&P 500 retains three critical advantages:

Depth of innovation

The U.S. remains home to many of the world’s leading tech and healthcare firms.

Scale of capital markets

Dollar liquidity ensures the S&P 500 remains central to institutional portfolios.

Investor psychology

Decades of habit mean traders instinctively look at the S&P as their first reference point.

Even when global investors diversify into other geographies, they usually maintain some form of S&P 500 exposure.

Real-World Scenarios: How Traders Use SPX500

Hedging macro risk

A fund heavily invested in European equities might short the SPX500 during periods of U.S.-led market stress to balance exposure.

Leveraging economic data

Day traders often position around Non-Farm Payrolls or CPI releases, where volatility in the S&P 500 is most pronounced.

Portfolio rebalancing

Wealth managers may rotate into or out of S&P 500 ETFs when adjusting client allocations across equities, bonds, and alternatives.

Global sentiment gauge

Even crypto traders watch the index. A rally in the S&P 500 can signal a broader risk-on environment, lifting digital assets alongside equities.

Common Misconceptions About the Index

It’s easy to treat the S&P 500 as infallible, but investors should be aware of its limitations:

  • It is heavily concentrated in mega-cap tech names.
  • It reflects U.S.-centric corporate culture, which doesn’t always map onto other economies.
  • It is backward-looking, in the sense that it tracks current constituents rather than future disruptors.
  • It doesn’t eliminate volatility; drawdowns of 20% or more still happen.

Being the benchmark doesn’t mean being risk-free.

How the SPX500 stacks up against other benchmarks

Investors often wonder whether they should track the S&P 500, the Dow, or a global index such as the MSCI World. While all three are widely followed, their design and purpose are different. Understanding these distinctions helps investors decide which benchmark is most relevant to their strategy.

For most wealth managers, the SPX500 remains the most useful benchmark because it combines liquidity, depth, and international reach. But for those seeking more global exposure, blending it with broader indices can make sense. The key is recognising what each index captures and what it doesn’t.

Why the SPX500 Still Sets the Standard

The S&P 500 isn’t perfect. No single index can capture every nuance of global growth. But in terms of liquidity, history, and global recognition, it remains unrivalled.

For City investors looking to preserve wealth, traders chasing short-term opportunities, or global funds seeking a benchmark, the SPX500 continues to provide a balance of stability and dynamism.

Markets may evolve, but the role of the S&P 500 as the world’s equity compass is unlikely to change anytime soon.

FAQs

Why does the S&P 500 matter globally?

Because U.S. companies dominate many industries, the index acts as a bellwether for both domestic and international economic health.

How is the SPX500 different from the Dow Jones?

The Dow tracks just 30 companies and is price-weighted. The SPX500 covers 500 firms and uses market cap, making it more representative.

Can retail investors trade the SPX500?

Yes. Through brokers, retail clients can trade CFDs on the SPX500 or invest in ETFs that track it.

Does the S&P 500 always go up over time?

Historically it has trended higher, but not in a straight line. Prolonged drawdowns and volatility are part of the journey.

What role does it play in diversified portfolios?

For many investors, it serves as the equity core, with other assets (bonds, commodities, alternatives) built around it.