S&P Global: The Unseen Titan Behind Market Indices ????
S&P Global may not be a household name, but its influence on the financial markets is unparalleled. Here's how this company became the king of index funds and a pivotal player in the world of finance.
The Origins: Henry Varnum Poor's Visionary Beginnings ??
The story of S&P Global dates back to Henry Varnum Poor, a man whose name belied his ambition. Despite a modest upbringing, Henry and his brother John became pioneers in the legal and financial realms, eventually turning their attention to the burgeoning railroad industry.
The Birth of a Financial Institution: Poor & Co ??
Henry's deep dive into the financial aspects of railroads led to the creation of Poor & Co, which published comprehensive guidebooks on the industry. These publications laid the groundwork for financial reporting and analysis, setting a standard for transparency and depth.
The Rise of Standard Statistics Company: Expanding Beyond Railroads ??
Parallel to Poor's efforts, the Standard Statistics Company emerged, inspired by the growing demand for financial indicators. They expanded the scope beyond railroads, providing financial insights into a wide array of industries.
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The Merger: Creating Standard & Poor's ??
In 1941, the merger of Poor & Co and Standard Statistics Company formed Standard & Poor's. This new entity would go on to create the S&P 500 in 1957, an index that would become synonymous with the health of the American economy.
McGraw-Hill's Acquisition: A New Era of Financial Services ??
The acquisition of Standard & Poor's by McGraw-Hill in 1966 marked a significant shift. While the S&P indices were highly respected, they weren't profitable investments until the index fund craze of the early 2000s changed the landscape.
The Index Fund Craze: A Shift in Investment Philosophy ??
The dot-com bust and subsequent market volatility highlighted the safety and reliability of index funds. Prominent figures like Warren Buffett advocated for the superiority of passive investing, leading to a surge in popularity for index funds.
S&P Global Today: A Financial Juggernaut ??
S&P Global has evolved into a financial conglomerate, with its indices and credit rating services being critical to the global financial system. Ironically, its stock price has outperformed the very index that promotes passive investing.