First correct wins! Why is the S&P 500 the best indicator of "the market" ?

Question

Even if you don't agree, In one or two sentences describe why this would be the best indicator of the current market conditions.

Note: There are over 10,000 stocks out there. Why these 500?

I have to wait 3 more hours to choose a best, but someone is very close and if there is nobody else that can do better...

Answer 1

Because it is diversified across all industries, and these are US companies, but they are multinational, so you get a flavor of the world economy as well as the US.

Second Part - size matters, these companies are larger than mid or small caps, which make up too small a portion of the market to be a true indicator, so these 500 major players are the best cross section of the market with their combined market cap.

Answer 2

I am not sure this is necessarily the best indicator, but probably a very good one as it represents 500 largest public companies in the US. There are broader indexes, but they include smaller companies and those could be more volatile and sometimes a smaller company may go under even when market is in good shape, thus skewing the overall index reading. If too many large companies are not doing well, it can not be a coincidence.

Answer 3

The Wilshire 5000 is a MUCH better indicator of market performance. It includes every stock traded on the NYSE (including those listed in the S&P) and most of the stocks on the NASDAQ and AMEX.

Answer 4

It is a broad cross section of the market. It includes both growth and value companies in a variety of industries.

Answer 5

dow jones only tracks 30 stocks
s&p tracks 500
better indicator it would seem to me

Answer 6

It's because it is both standard and poor

Answer 7

someone wins yet????? if yes, i don't have to answer.