S&P 500

Think of it this way

It is the thermometer of large investors' appetite for risk. Note: it measures appetite for risk, not how the economy is doing. They are different things and they often move in opposite directions.

What is S&P 500?

Daily closing price of the S&P 500 index, which groups the 500 largest listed companies in the United States.

How to read S&P 500

It is overlaid on any macro chart. Rebased to 100 when several assets are turned on.

What S&P 500 means for the market

It is the world's benchmark risk asset. Its sensitivity to liquidity is real but more cushioned than bitcoin's, because behind it there are corporate profits that support the valuation. It reacts more to long-term rates than to the amount of liquidity.

Where the money flows

From buyer to seller, as with any stock: the amount of money in the economy does not change, it only changes hands. Example: if a pension fund buys 10 million in stocks, those 10 million move to the account of whoever sold them. What rises or falls is the price at which both sides agree to trade, and that depends on how much money is looking for somewhere to go.

What to watch in S&P 500

Overlay it on net liquidity and look for the stretches in which they move in opposite directions. If the S&P rises while that liquidity falls, the rally is not being paid for by new money: it is being paid for by corporate profits, share buybacks, or investors selling something else to buy stocks. The price rises all the same, but for a different reason. And those stretches have historically been more fragile in the face of any scare.

A reference asset. The largest stock market in the world.