Major stock market indices have become highly favoured instruments among asset classes for Australian traders in recent years. These instruments are especially popular among macrotraders due to their close correlations with macroeconomic dynamics.
Best Indices For Australian Traders
Major market indices represent benchmark averages of the world’s top stock exchanges in major economies. Access to these markets is available through the secondary market or Over-the-Counter (OTC) providers. Below can be a good selection of indices for stock market participants.
- Related Guide: Compare the best Australian CFD brokers for trading indices.
ASX 200
I like the ASX 200 due to its heavy weight on mining and banking stocks, making the index an excellent component for diversifying risks from the tech-heavy US averages.
The index comprises the top 200 companies listed on the Australian Securities Exchange and is a market-capitalization-weighted index.
The movement of the ASX 200 usually mirrors trends on Wall Street, reflecting the rotation of the eleven sectors.
Despite this correlation, the ASX 200 tends to be less volatile than its US counterparts, primarily owing to the growth stability in its large market caps, such as BHP and CBA.
S&P 500
There’s no doubt that the S&P 500 stands as one of the essential choices in indices trading, offering comprehensive coverage of quality stocks listed on the New York Stock Exchange.
Trading the S&P 500 brings enjoyment as the index provides insights into the rotation of its 11 sectors based on macro trends, resembling the shifts in funds akin to a Merrilyn investment clock.
The S&P 500 is widely regarded as a crucial indicator of market risk sentiment, and its technical levels are often utilized for positioning indications by active traders.
Nasdaq 100
Firstly, it’s important to note that the Nasdaq 100 differs from the Nasdaq Composite.
It is a much more volatile index compared to its counterparties. The Nasdaq 100 comprises the 100 largest non-financial companies listed on the Nasdaq Stock Exchange.
Comprising the 100 largest non-financial companies listed on the Nasdaq Stock Exchange, the Nasdaq 100 holds a special place for me as it includes all my favourite US tech stocks like Apple, Microsoft, Amazon, Meta, and Nvidia.
While high volatility provides trading opportunities, the average annual return of the index has showcased about 20% over the past decade, making it very appealing to long-term investors as well.
Dow Jones
I include the Dow in the list due to its higher price stability than its peers.
The index is a price-weighted major index and comprises the top 30 largest US companies’ stocks. This characteristic makes it less volatile, attributed to the larger market caps of its components.
These companies are well-performing businesses with relatively lower price dynamics.
The Dow is more heavily weighted by manufacturing and financial companies, making it more akin to a cyclical index compared to the growth-oriented Nasdaq.
Nikkei 225
I like the Nikkei 225 because of the low borrowing cost of the Japanese Yen, making trading in Japanese stock markets highly appealing.
The Japanese government encourages foreign investors to invest in its country and provides incentives to shareholders for investment returns.
The Nikkei 225 is also a price-weighted index, measuring the 225 largest Japanese companies.
However, it’s worth noting that the index can be quite volatile, given the speculative nature of the markets, in contrast to value indexes like the Dow Jones.
Tina was a Market Analyst at CMC Markets from 2015 to 2024, providing client education, market commentary, and media presentations. She specializes in technical analysis and market fundamentals. Tina believes financial markets comprise a vast area reflecting economies, politics, history, psychology, and philosophy. As a result, her analysis is based on her interpretation of a specific country’s economic and historical background, alongside investor sentiment and behaviour.
Tina’s expertise has garnered recognition, with her commentary frequently quoted by reputable sources like Bloomberg, CNBC, Routers, WSJ, and AFR. Her insights span a diverse spectrum, covering various financial domains, including stock markets, foreign exchange, commodities, and cryptocurrencies. Previously, she also spent significant time with China Central Television. This experience allowed her to develop a deep understanding and insight into China’s economics and business.
