Are Some Market Indexes More Important Than Others?

Are Some Market Indexes More Important Than Others?
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Important Market Indexes

We do have a quick question here from Mark about equities. Mark wants to know whether there is some equities that is considered more important to follow than others. Is there one like the Dow Jones or the NASDAQ or the S&P that is considered as the leader for the rest of the equity pack?

Now sometimes when looking at equity markets, there is often one index or countries indices that might be leading the pack. But it’s mainly driven by the type of sentiment that is moving the market at that time.

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For example, if we have massively positive or negative earnings results for mainly industrial companies. We would expect that to have a bigger impact on something like the Dow Jones compared to the S&P or the NASDAQ based on the composition of that index. So in that sense it would act as a possible leader, for that particular session.

Or we have very big news that maybe affects the technology sector specifically, that might affect indices like the NASDAQ and the S&P more depending again on the companies and what they weighting is in those particular indexes. Now then we also have more country specific factors as well.

So if something really bad happens, for example, let’s say there’s, a debt crisis in Europe, another one for example. That would affect equities across the board, but it would possibly affect European equities a lot more, like the DAX, like the Euro Stoxx. As it’s a lot closer to home and obviously that might act as a leader, in the equity space for that particular session. Or let’s take something like the auto industry. So we know auto industry is very important for something like Germany.

If we hear that the U.S. is putting tariffs on European autos and that we’ll see downside for most equities across the board, as a negative risk turn. But we would probably see it have a much bigger impact in the DAX, and the DAX might lead the downside as those auto companies in the index will see lots more downside compared to other type of company or stock prices.

So yes, in that scene, some of them can act as a leader. But it’s mainly driven by the type of news and the type of sentiment, and how that sentiment affects the companies or the sectors involved in those particular indexes.

So generally speaking, there isn’t really any one index that is considered as the leader.

So yes, a lot of people follow the S&P 500. It is considered as a, a broad index for equities as a whole. But we prefer to look at all the major equities across the board, across countries, to get a sense of the overall mood of the market at any given time.

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