If you’re in the financial industry, you’ll know that the FTSE 100 and S&P 500 are both indices that show the health of major stock markets. But, if you’re new to investment or a business looking to sell your products internationally, you may be wondering what they measure, and how they differ.
What are the S&P 500 and FTSE 100?
The S&P 500 stands for Standard and Poor’s 500 Index, which is a US stock market index based on market capitalisations of the top 500 businesses that have common stock listed on the New York Stock Exchange or NASDAQ. Otherwise known as ES1, the S&P 500 represents the stock index as accurately as possible, allowing investors to view an ES futures chart and market predictions, assisting them in making more informed financial and economic decisions. The futures market itself is one of the biggest derivative financial markets, allowing you to speculate on the S&P 500 future performance.
On the other hand, the FTSE 100 stands for the Financial Times Stock Exchange 100 Index, and is often known colloquially as ‘Footsie’. The FTSE 100 is a UK stock market index, which looks at market capitalisations of the top 100 businesses that have stock traded on the London Stock Exchange.
Similarly to the S&P 500, the FTSE 100 aims to provide an accurate measure of the market as a whole to make informed predictions. Due to this, it has been used as a measure of the health of the UK’s stock market and the country’s economy for several decades.
However, it’s worth noting that these indices aren’t always representative – they simply look at a sample of the market to make predictions. This detachment was particularly highlighted when the FTSE 100 hit an all-time high in February 2023, despite the wider UK economy being in a state of flux and uncertainty.
What’s the difference?
As you can see, the purpose of the S&P 500 and FTSE 100 is almost identical – they are both used as an indicator of how the US and UK are performing economically. In this sense, the FTSE 100 is to the UK what the S&P 500 is to the US. That said, there are a few differences between the two indices.
Perhaps the biggest difference between the two is the sample size. As you might have guessed, the S&P 500 holds 500 stocks, and the FTSE 100 holds 100. As the S&P 500 holds five times the number of stocks as the FTSE 100, it inevitably is worth more overall. In fact, it’s estimated that the S&P 500 is around 12 times the size of the FTSE 100 when looking at market capitalisation. However, due to the types of businesses within the indices, and the markets they operate in, the FTSE 100 does tend to be more stable than the S&P 500, which can be a little riskier due to the instability and ever-changing nature of the technology sector – hence why the S&P 500 is looking to distance itself from ‘Big Tech’.
Overall, there are many similarities and differences between the FTSE 100 and S&P 500. By understanding this, you will be better placed to monitor the UK and US markets as a trader or investor alike.