Have you ever wondered why every day economic news talks about various indices like SET, S&P 500, Nikkei 225 constantly? In fact, these indices are tools that help us understand the direction of the stock market.

Stock indices, simply put, are numbers that show an overall picture of a group of stock prices, such as SET50, which includes 50 major Thai companies. The price changes of these stocks are reflected through the index number. If the index rises, it indicates a strong market; if it falls, it shows a weakening market.

What’s interesting is that each index has a different calculation method. Some give weight to large-cap stocks (Market Cap weighted), some to stock prices (Price weighted), and some consider all stocks equally important (Equal weighted). These different methods cause each index to behave differently.

Talking about the most famous global index, it must be the S&P 500 of the United States, which includes 500 large companies. This number is followed by investors worldwide because it accurately reflects the U.S. economy. The S&P 500 includes giants like Apple, Microsoft, Amazon, which dominate the global market.

And what about the Dow Jones? It is a price-weighted index consisting of only 30 companies, but these are the largest and oldest companies in the U.S. If the S&P 500 is a broad snapshot of the U.S. market, then the Dow Jones is like focusing only on the leading stocks.

For technology, the NASDAQ 100 is the real deal. This index includes 100 technology and consumer goods companies that are not financial institutions. So whenever the global tech sector improves, NASDAQ tends to rise. These companies include Apple, Amazon, Microsoft, Alphabet (Google), which are giants that drive this index’s movement.

In Asia, the Nikkei 225 of Japan has a long history, dating back to 1949. It reflects Japan’s economic picture from post-World War II to the present. Meanwhile, the FTSE 100 of the UK is an important global index for Europe, comprising 100 companies listed in London.

And Germany? The DAX 30 is Germany’s index, similar to the Dow Jones of the U.S., consisting of 30 leading companies. These global indices all play a vital role in indicating the economic health of their respective countries.

For Thailand, we have the SET index as the main indicator, along with the more specific sub-indices SET50 and SET100. SET50 started on August 16, 1995, with an initial value of 1,000 points, and SET100 began on April 30, 2005. The companies in these indices are reviewed every six months, in June and December.

What’s important to understand is that indices are not just numbers for news; they are tools that truly reflect the health of the economy. When global indices move, they mirror investor confidence, company strength, and overall economic trends. Therefore, tracking indices like SET in Thailand or S&P 500 in the U.S. helps us gain a deeper understanding of the market.