Not really. One, it was unlikely to happen. The market not pricing in any rebalancing communicated that. Two, the magnitude–even for the S&P 500–would have been small. About a third of stocks are in passive strategies, about 15% in any index, and while most of that is the S&P 500, the index market is incredibly competitive.
S&P made the right move. But the tragedy this episode has revealed, at least to me, is in how venal and influential this new breed of financial influencers on YouTube and X are, and the degree to which they're willing to misinform to get clicks.
Also, since when is it appropriate/intellectually OK to respond to allegations of corruption by saying ‘stop freaking out, it’s only a small amount of corruption PER PERSON’.
S&P adopting the rule changes.
> It already happened in Nasdaq
NASDAQ 100 is marketed as a tech-focussed fund. It's also way smaller. And it makes sense for it to include new issues. Total-market funds are also being adapted to include these, and again, that makes sense.
> for most investors it already did happen
What do you mean? For the vast, vast majority of investors, nothing happened. If S&P had adoped these rules, the majority of investors would still be unaffected.
> when is it appropriate/intellectually OK to respond to allegations of corruption by saying ‘stop freaking out, it’s only a small amount of corruption PER PERSON’
I'm saying the allegations of corruption were misplaced. The rule changes have been mooted for years. Did Musk et al try to put their thumbs on the scale? Sure. That should be called out.
But the scaremongering that followed was full of factual misrepresentations. Moreover, it presumed corruption across the board versus certain actors trying to corrupt a process, all for the purpose of getting views.
Regarding misplaced corruption allegations. Virtually everywhere it is illegal to both give a bribe as to receive a bribe. It’s not just Musk et al who should be called out.
As for the unnamed sources doing the scaremongering, it seems you should be calling those specific people out instead of downplaying this whole issue. You’re dismissing the argument not on its merits but because some people argue for it badly.
Russell does total-market indices. S&P also changed its rules for total market because it pretty clearly makes zero sense for total market to ignore a few trillion dollars of the market.
The NASDAQ 100 change has some capability of being sketchy due to Nasdaq wanting to win the listing. Russell, eh, not seeing it. They're just being Russell.
> it seems you should be calling those specific people out. Instead you’re downplaying this whole issue because some people overreacted
It's a couple YouTubers. No crime of the century. But from what I've heard from the RIA community, a not-inconsequential amount of fees are being generated in the Bay Area from folks rotating out of low-fee index funds into bespoke nonsense because they are scared about a 0.3% change they think happened that didn't ever occur.
If everyone expected the price of the stock to remain the same or higher after the seasoning windows then why were those with the most to lose if it did not, lobby so hard to change the rules?
Also, what do you mean the 0.3% thing never happened? The ipo hasn’t happened yet, so obviously the index rebalance hasn’t happened.
Total market is meant to be total market. It isn't slicing out large caps, like the S&P 500. The assumption was new issues would be too small to matter. That's clearly changed.
> main issue for me is that the seasoning window was reduced
Seasoning really only matters nowadays in respect of lockups. Private markets provide a lot more price signal than we had previously.
> what do you mean the 0.3% thing never happened?
S&P 500 won't include SpaceX. The magnitude of the effect of including SpaceX would have been on the other of about 0.3% for the S&P 500. (The other indices collectively matter less than individual allocators at e.g. BlackRock and Fidelity.)
I'm not going to say Nasdaq didn't do this corruptly. But there are plenty of good reasons for the NASDAQ 100, an index marketed as being tech focussed, bending over to include AI issues that don't require nefarious explanations.
I think it was reasonable to ask if they had. If SpaceX were a one off, it would be one thing. It's not. We have a line of potentially trillion-dollar IPOs raising about as much money as the most valuable tech companies in the world, Alphabet and Meta.
It's reasonable to ask if the definition of a large cap has changed. It's also reasonable to conclude that it hasn't, at least not in respect to minimum-float and profitability requirements.
> Why do you think Musk has made it so clear that he’s strongly weighting that inclusion in his choices?
Musk obviously cares, and almost certainly didn't restrain himself in pushing that care. That doesn't change that these questions and processes predate his engagement with them.