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> I was planning to move to an equal weight index The only substantial effect I've seen of the influencers who were doomsplaining this decision was some minor

> I was planning to move to an equal weight index The only substantial effect I've seen of the influencers who were doomsplaining this decision was some minor churn in retirement assets from low-cost S&P 500 followers to higher-cost funds. (The market, broadly, never priced in a rebalancing of the S&P 500. So this was almost entirely whipped up by influencers.) Broadly speaking, if you were actually considering trading on the back of S&P's decision, or worse, if you actually did, consider trimming who you follow for financial advice.

vostrocity 5mo ago
The market may not have ever priced in a rebalancing of the S&P 500, but the S&P 500 also has never allowed entry of companies that may never become profitable.
- JumpCrisscross 5mo ago
  > the S&P 500 also has never allowed entry of companies that may never become profitable Yup. Which is why it was always a long shot. I personally thought they'd adopt some of the seasoning rules, but they were more conservative than even that.
- matwood 5mo ago
  > but the S&P 500 also has never allowed entry of companies that may never become profitable I suspect this will be revisited if all these companies are still 1T+ market cap 12 months from now. At some point the S&P will have to say the market itself has spoken and likely capitulate.
  - JumpCrisscross 5mo ago
    > At some point the S&P will have to say the market itself has spoken and likely capitulate It really doesn't. The S&P 500 is an opinionated index. If you want total market, buy a total-market index. My guess is S&P will stick to its guns, Anthropic will season in, and SpaceX and OpenAI (if it goes public) will stay outside for a few years.
    - matwood 5mo ago
      They can certainly say they no longer track the 500 leading large-cap companies on the US exchanges. The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization.
      - bootsmann 5mo ago
        Read the quote you posted again
kgwgk 5mo ago
> The market, broadly, never priced in a rebalancing of the S&P 500 And if you had seen it what would have that pricing looked like?
- JumpCrisscross 5mo ago
  > if you had seen it what would have that pricing looked like? Look up rebalancing trades, or, less graciously, rebalancing front running. If the index is going to rebalance to include a new entrant, you'll see the other components trade down in anticipation. It's a very tight signal, and it wasn't present to any measurable degree for the S&P 500.
  - kgwgk 5mo ago
    Again, what would it have looked like? What does “other components trade down in anticipation” mean when SPCX doesn’t even exist?
    - JumpCrisscross 5mo ago
      > What does “other components trade down in anticipation” mean when SPCX doesn’t even exist? Let's model an equal-weighted index with nine components, with each thus representing 1/9th of the index's allocation. You learn that a tenth member is going to be added. You don't know who it is. But you know that each of those nine will, after that member is included, represent 1/10th of the index's allocation versus the 1/9th they did before. You know a precise bucket of trades everyone following the index is going to mechanically enter into. Which means it behooves you to be on the other side of it. When rebalancing–or new inclusion–occurs, you see this pre-trading. Similar to merger arb. But much more clear as a signal because you see it in precise ratios across the index's members. It's difficult to pick up for small indices. But for something like the S&P 500, you'd expect to see someone selling those shares in anticipation, and, now that the rule isn't going into effect, someone dumping those shares in those ratios.
      - kgwgk 5mo ago

vostrocity 5mo ago

The market may not have ever priced in a rebalancing of the S&P 500, but the S&P 500 also has never allowed entry of companies that may never become profitable.

JumpCrisscross 5mo ago
> the S&P 500 also has never allowed entry of companies that may never become profitable Yup. Which is why it was always a long shot. I personally thought they'd adopt some of the seasoning rules, but they were more conservative than even that.
matwood 5mo ago
> but the S&P 500 also has never allowed entry of companies that may never become profitable I suspect this will be revisited if all these companies are still 1T+ market cap 12 months from now. At some point the S&P will have to say the market itself has spoken and likely capitulate.
- JumpCrisscross 5mo ago
  > At some point the S&P will have to say the market itself has spoken and likely capitulate It really doesn't. The S&P 500 is an opinionated index. If you want total market, buy a total-market index. My guess is S&P will stick to its guns, Anthropic will season in, and SpaceX and OpenAI (if it goes public) will stay outside for a few years.
  - matwood 5mo ago
    They can certainly say they no longer track the 500 leading large-cap companies on the US exchanges. The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization.
    - bootsmann 5mo ago
      Read the quote you posted again

kgwgk 5mo ago

> The market, broadly, never priced in a rebalancing of the S&P 500 And if you had seen it what would have that pricing looked like?

JumpCrisscross 5mo ago
> if you had seen it what would have that pricing looked like? Look up rebalancing trades, or, less graciously, rebalancing front running. If the index is going to rebalance to include a new entrant, you'll see the other components trade down in anticipation. It's a very tight signal, and it wasn't present to any measurable degree for the S&P 500.
- kgwgk 5mo ago
  Again, what would it have looked like? What does “other components trade down in anticipation” mean when SPCX doesn’t even exist?
  - JumpCrisscross 5mo ago
    > What does “other components trade down in anticipation” mean when SPCX doesn’t even exist? Let's model an equal-weighted index with nine components, with each thus representing 1/9th of the index's allocation. You learn that a tenth member is going to be added. You don't know who it is. But you know that each of those nine will, after that member is included, represent 1/10th of the index's allocation versus the 1/9th they did before. You know a precise bucket of trades everyone following the index is going to mechanically enter into. Which means it behooves you to be on the other side of it. When rebalancing–or new inclusion–occurs, you see this pre-trading. Similar to merger arb. But much more clear as a signal because you see it in precise ratios across the index's members. It's difficult to pick up for small indices. But for something like the S&P 500, you'd expect to see someone selling those shares in anticipation, and, now that the rule isn't going into effect, someone dumping those shares in those ratios.
    - kgwgk 5mo ago