Stock indices are a popular trading instrument because, in addition to investment opportunities, they give traders an overview of the performance of a specific segment of the market. For example, if traders want to get a general sense of how technology stocks are doing in the market, they can take a look at an index that tracks technology stocks for a brief overview. These prices can then be used for analysis, as well as trading. Traders often keep an eye on top global indices such as US indices S&P 500 and Dow Jones Industrial Average, and European Indices like the UK FTSE 100 and the German DAX 30. These indices can be used to determine the performance of the stocks and markets contained in the “basket” of assets the index represents, while investors can trade on the price of the index as it fluctuates up and down in the markets. Let’s take a look at three of the most popular indices in the world, and how they are performing in the markets so far this year.
US S&P 500
As one of the top US indices, one of the main factors that have influenced the S&P 500 recently, aside from the Covid-19 pandemic, is the US elections. The S&P 500 closed at a high on the 20th of January and rose even further on the 21st as President Joe Biden was inaugurated. The S&P 500 is one of the most popular US indices and tracks the performance of 500 large companies which are listed on the US stock market. The presidential inauguration brought about a 1.9% increase in just two days, going from a closing price of $3773.33 on the 18th of January to $ 3848.58 on the 20th of January 2021. However, after this high, the S&P 500 plummeted down by 4.4% to close off January at $3677.57 on the 31st. When it comes to individual stock performance, one of the S&P 500’s top performers so far this year is Alphabet (Google) which was trading up by 8.1% year to date at the beginning of February, and one of the worst-performing S&P 500 stocks was STERIS which was down by 7.2% year to date.
Germany DAX 30
Germany’s DAX index tracks 30 of the biggest companies in the European economic powerhouse and is one of the top European indices. The DAX has been riding high on vaccine optimism, as the country anticipates an improvement in the economic activity once the vaccine begins to take effect. The DAX leaped up by 102 points between the 2nd and 3rd of February for a 0.7% increase, to land at a price of 13937 just after a 1.6% jump the day before. However, there has now been a delay in the vaccine supplies as AstraZeneca struggles to deliver on what they had promised, which could cause a knock-on effect on the index as Germany’s economic recovery could be slower than previously expected. The DAX 30 index is one of the most popular European indices, and it is also impacted by the recent trend amongst retail traders in Europe who are focusing on specific assets in order to increase their value. All in all, the DAX, similarly to the other indices, is experiencing continued volatility as we saw in 2020.
UK FTSE 100
The retail trading trend we mentioned above has also impacted the UK’s FTSE 100 over the past few months, which tracks 100 of the companies on the London Stock Exchange with the highest market capitalization. So far this year, the FTSE 100 has been on a rollercoaster ride, much like many other instruments, with a sharp rise of 6.8% in the first week of January, to close at 6860.57 on the 8th. The index then dropped 7.6% between the 8th of January and the 29th, to close on a price of 6333.01. As the retail trading frenzy calmed down and the vaccine rollout brought good news to the market and improved overall sentiment, the FTSE 100 notched up by 8 points on February 2nd to close at 6524. As the Bank of England sets new rates, this could also impact the FTSE 100 as we head towards the end of February, so traders should stay on top of the latest news to keep ahead of the markets.
The bottom line
Following the performance of top US indices and top Europe indices can serve a dual purpose, both for traders who invest in their price movements as well as those interested in gleaning helpful information on specific market segments. As for the former, the type of volatility experienced by many indices can offer traders who invest in CFDs or Contracts for Difference a host of opportunities, along with some risks. Trading CFDs allows you to take advantage of both the increases and decreases in price movements, without the need to purchase the underlying asset.
iFOREX is a reliable broker with decades of market experience, offering clients the opportunity to trade over 900 CFD instruments including US indices such as the US 500 (which follows the S&P 500) and European indices such as the Germany 30 (which follows the DAX index), the UK 100 (which follows the FTSE 100) and many more. iFOREX also offers a wide variety of educational materials including informative PDF guides, video tutorials, and 1-on-1 training with a live trading coach who can help develop your trading skills at your own pace.
Sign up today and experience the iFOREX trading platform yourself, available for both desktop and mobile. Built from a combination of innovative technology and actual trader feedback, it comes kitted out with a host of trading tools including live rates, market alerts, trading signals, and built-in risk-management. Join iFOREX today and start trading with knowledge.