Despite geopolitical tensions and a looming recession, financial markets outdid expectations in 2023 and 2024, with many of the major stock market indices recording strong gains especially throughout the end of the year.
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The most striking example is the U.S. tech company Nvidia: the firm's
share price skyrocketed in 2023 and 2024, making it the
third largest company worldwide in the technology sector in terms of market capitalization. In general, all stock market indices ended the year with significant gains, despite fluctuations or many companies underperforming indices throughout the year.
What is a stock market index?
A stock market index measures the performance of a segment of the stock market. It is calculated based on the prices (and often market capitalization) of the companies (or other underlying assets) which belong to the index. A point in time is assigned a starting value (say, 0 or 100), with changes then being measured in reference to this starting value. This allows the index to easily show how a market has developed over time. One of the most important stock indices in the world is the
S&P 500, which measures the performance of 500 of the largest U.S. companies. With a starting value of 386.36 in 1957, by July 2023 the index had risen to 4,472.16. Similarly, the
Dow Jones Industrial Average (which includes 30 prominent U.S. companies) grew from 40.94 in 1896 to 42,544.22 by the end of 2024.
What are the main stock indices in the world?
There are literally thousands of stock market indexes in the world, covering everything from the world economy as a whole, to sub-sectors of national or local economies, to prices of other financial assets like
precious metals. Aside from the big two aforementioned U.S. stock market indices, some of the most famous national indices are: the
FTSE 100 (which includes the largest 100 U.K. companies); the Japanese
Nikkei (comprised of 225 selected major Japanese companies); Hong Kong’s
Hang Seng (covering the 50 largest companies on the Hong Kong Stock Exchange), and the German
DAX (with the top 40 German companies on the Frankfurt Stock Exchange). All of these indexes are considered bellwethers for the corresponding national economy. Looking at broader indices, perhaps the two most important are the
MSCI World, which includes 1,583 companies across 23 developed economies, and the and the
EURO STOXX 50, containing 50 leading eurozone companies representing all major industries.
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