Benchmarking is when we compare something to a standard or an average to gauge it performance. It’s a simple way to tell if something is doing better or worse than it we expect it to. In charts, benchmarks help give context so we’re not just looking at random numbers or movement, they show us what’s normal.
The chart I found shows the S&P 500 with a moving average line over it. The moving average works as the benchmark here because it smooths out all the short-term movements and gives a sense of the overall trend of the market. This makes it easy to see when the market is performing above or below the usual. This is very useful for investors who want to track long-term direction and use that information to make decisions.
I think this benchmark is really clear and effective because it makes long term movement simple to read. Even if you don’t know much about stocks, you can tell what’s going on just by looking at it. The moving average line stands out just enough to help you make out what's going on without cluttering up the chart, making judgements simple.
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