That seems to only address the stock market, and it is not obvious to me why an all share index would be immune to it. What happens if a company goes bankrupt?

That seems to only address the stock market, and it is not obvious to me why an all share index would be immune to it. What happens if a company goes bankrupt? I think they just replace it in the index? So at least people who only invest in all shares indices would have done well?