Well Chinnese companies are way more efficient, Deepseek did manage to get quite far with a relatively tiny number of staff and limited funding. Then you have companies like Meta which suck pretty much at everything they (excluding their core business) regardless of how much money they throw at it.
> This is one of the most successful investment companies
It was for a long time. There is not a lot of evidence that's still the case (so far at least but even if the crash comes but its not big enough its not guaranteed they will outperform S&P 500 over a several year period).
It seems like of the most outdated and inflexible indicators that's widely used though? Does not account that a much higher proportion of the US economy might be represented in the stock market and that US service companies are generating massive revenue outside of US (in some cases the majority). That wasn't the case 50 years ago.
In plenty of cases it's absolutely self evident (especially when there are plenty of historical precedents for similar or analogous situations).
Yes you can get involved in extended arguments with people arguing in bad faith or whose world view is fundamentally incompatible with your but that's usually just a waste of time (I mean you wouldn't argue with Nazis either just the same as with people trying to institute a Stasi style surveillance apparatus through slow boiling)
Globally in relative terms? Kind of. Sure the gap to the US was huge but it still controlled pretty much entire Africa and much of Asia (with China and Japan obviously not doing great..)
> But at a fundamental level, the S&P500 index exists to track the market
No, it exists to track a subset of the market based on specific criteria and weights. It's not even based on the market cap of included companies directly.
'S&P Total Market Index' exists to track the market.
> qualify as major members of the index
Not based on the inclusion criteria.
AND even if that were changed they wouldn't be near the top anyway, despite the trillion dollar valuations initially they wouldn't even be in the top 20 by weight.
> and defeats the purpose of the index entirely.
The index has operated based on specific rules defining inclusion criteria for a while. Can we just conclude that it did not become the most popular index despite never being designed to track the full market or be based directly on total market caps.
After all it's the people advocating the inclusion of these companies are advocating an arbitrary modification to the rules just to get them in.
> what an index describes vs what investors prefer
What makes you think S&P 500 did not become the most popular index (instead of full market ones) because of the rigid entry criteria and and rules for weights.
Amongst other things the weighting is not even based on the market cap.
> The 409a has a lot of words and numbers to justify a particular valuation
That's tangential. The valuation is based on supply and demand, nothing else.
Amongst other things the supply part of the equation will be low because all these companies are only to make a very small proportion of their shares available on the public markets.
> The purpose of an index is to provide a benchmark of the market
Usually a subset of the market based on specific criteria. Total market indexes and funds exist, maybe there is a reason S&P 500 despite its "strict" inclusion criteria is more popular than them?
Their float will be very small so yes, the value of their shares that anyone could buy at even the most optimistic valuations would be tiny compared to most public megacaps.
> Btw I don’t really know how index funds work, but if they need to track the index as closely as possible, they will all have to buy those stocks on a certain day, no?
S&P wouldn't include them until they became profitable and even if they did they wouldn't even be in the top 20.
> accurately reflect the market. When S&P rules end up excluding a significant part of the market with trillions
Define what that means? The weights are based on the value of shares available publicly, not market cap. So even if included SpaceX wouldn't even be in the top 20 and have a lower weight than Johson & Johson.
A lot of what people are saying here seems to be based on a misconception of what S&P 500 is supposed to be. Maybe it became the most popular index because of those rigid rules?
S&P 500 weights are based the value of shares available on the public market not the market cap. Based on that SpaceX will be nowhere near the top 10.
Do you think their valuations wouldn't fall dramatically if they were willing to float a significant proportion of their shares on the market anytime soon.
So Space X, OpenAI, Anthropic? Those are perfect examples.
It's unlikely their valuations could survive the IPO if their float wasn't extremely low.
> top 20 largest companies in the US market
You do know that S&P weights are based on the free float and not the market cap. So based on that SpaceX etc. will not be in the top 20. The total value of shares of Johnson & Johnson available on the public market will be much higher than that of SpaceX/etc. based on their current valuations.
> the S&P 500 no longer reflects the actual market
Well it was never intended to reflect the full "actual market".
> no longer an adequate benchmark
According to your definition it never was. However there were and are plenty of other index benchmarks which serve different purpose. Its just that S&P 500 managed to become the most popular one, why did it happen if it was always inherently flawed?
Like they didn't even add Microslop for 8 years...