The S&P 500s $20 trillion value... how did we get here?

By Mike Jones, posted February 16, 2017

As I was driving to work this past Monday morning, a reporter for Bloomberg Radio announced that the collective value of the S&P 500 had exceeded TWENTY TRILLION DOLLARS for the first time ever. 

Here is what it looks like: $20,000,000,000,000.00.  What a big number!

Long live the capitalists!

Then I started thinking. What does that mean? Is it a good thing or a bad thing?Should I be happy or worried? But mostly, how did this happen?

The American experiment, both politically and financially, is a historical marvel. To think that all that we have and the way we govern was a mere idea in the mind of a few men just 241 years ago is astounding. 

First, citizens must be free if they are going to have any chance at pursuing their own independence and success. Second, the rule of law must be predominant across the country to ensure stability for investments to grow. Third, there must be a system or infrastructure in place that allows those with savings to invest for a potential return. 

The United States of America, with all of its imperfections, can look at this number--$20,000,000,000,000.00 for its 500 biggest companies--and proudly say, "We did this!"  No other country even comes close.

How did this happen financially?  Honestly, how did the investors in the S&P 500 people make all of this money in the stock market? 

At the very beginning of the process, somebody or a group of somebodies must have an idea which needs funding while others have savings/money to invest.

Then there must be trust. Those with the money must trust that the funds invested will be used for the purpose intended. Then money is invested (underwriting). Add to this ways to measure and track the progress (accounting) and a daily auction for those seeking some access to their money (stock market) as well as overseers to investigate complaints and to enforce the rules (regulators). 

Before you know it those savings turn into buildings and airplanes and restaurants and computers and banks and oil wells and ...  

Then one day someone with a very sophisticated spreadsheet adds up all they are worth at auction today and reports that the tally is $20,000,000,000,000.00. 

Impressive!

Mike Jones is Managing Director / Investing Group of Argent Advisors, Inc. Email him at mjones@argentadvisors.com. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5844. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc.  No forecasts can be guaranteed.  Argent Advisors, Inc. does not offer tax, insurance or legal advice.  The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.