Why does anyone give a rat’s ass about the weighting of an index? How does that affect the share price of a stock I invest in?
Movements of the index depend on price movements of the constituent components. If you are investing passively in an index tracking fund, you might be interested to look under the hood and understand how the thing works. Or you might not. To each their own
From april 27 2023 another 'we're in a recession already' call that proved wrong.
Carl Quintanilla @carlquintanilla “.. capital spending intentions have plunged .. equipment orders are rolling over .. the inventory correction will continue through Q2 .. In short, the economy barely grew in [Q1] but it is likely to shrink outright in Q2 and Q3. Welcome to the recession.”
“.. capital spending intentions have plunged .. equipment orders are rolling over .. the inventory correction will continue through Q2 .. In short, the economy barely grew in [Q1] but it is likely to shrink outright in Q2 and Q3. Welcome to the recession.” @PantheonMacro#GDPpic.twitter.com/JWGpjBLjv3
Why does anyone give a rat’s ass about the weighting of an index? How does that affect the share price of a stock I invest in?
Movements of the index depend on price movements of the constituent components. If you are investing passively in an index tracking fund, you might be interested to look under the hood and understand how the thing works. Or you might not. To each their own
Yes, but I asked about the effect on a STOCK I invested in, not a fund. Anyway the question was rhetorical as I know an index weighting has no effect on individual stocks. I was trying to educate Ghost who seems to be clueless regarding how this all works. Or he is a troll. Either way, he should be ignored by serious investors.
index weighting does affect prices of individual stocks.
being in an index guarantees a flow if money from big index funds. We can argue how much that matters, but it does matter. Some think the rise of indexing contributes to the concentration of the megacaps...it's a snowball effect....big stock gets to be a larger portion of the index, which makes the index funds buy it, which makes it bigger, which makes more index funds buy it, etc.
I think the Tesla sedan is a sharp looking car, but so is my 2002 Acura TL-S. The question I have asked myself is battery life, replacement, future cost. Anyone that has battery operated tools knows this becomes an issue over time. Sully at CNBC commented on this in a Tweet today:
Large auto dealer (50+ shops) told me recently they are discussing how best to handle older model EV trade ins (in years to come) given battery condition difficult to discern.
Right now they almost immediately wholesale any Teslas they get in to avoid risk. https://t.co/dMU8aiZpR3
We purchased a Dyson stick vacuum a number of years ago. It was not cheap, probably $350, and have replaced the battery twice at $50 a pop. The rotary head on one tool no longer works. Same experience on a battery drills, and lawn trimmer. Replacing batteries over time. On the other hand, I have a 20 year old lawn mower, circular saw, drills, that are gas, or plug in electric, still function as originally manufactured.
The other consideration, how environmentally friendly is an EV, if, 1) the lifespan is shorter, 2) more waste ends up in landfills?
“Undoubtedly, the idea that the total return of the S&P 500 could underperform Treasury bills for over a decade seems preposterous. Of course, that’s exactly what the S&P 500 did from May 1995 to March 2009.
It’s also exactly what the S&P 500 did from August 1959 to August 1982.”
“Undoubtedly, the idea that the total return of the S&P 500 could underperform Treasury bills for over a decade seems preposterous. Of course, that’s exactly what the S&P 500 did from May 1995 to March 2009.
It’s also exactly what the S&P 500 did from August 1959 to August 1982.”
—John Hussman
Looking at your 2009 date, the Dow was up 400% since then. And T-Bills? Were they up 400% since then? I love the way you selectively choose dates.
“Undoubtedly, the idea that the total return of the S&P 500 could underperform Treasury bills for over a decade seems preposterous. Of course, that’s exactly what the S&P 500 did from May 1995 to March 2009.
It’s also exactly what the S&P 500 did from August 1959 to August 1982.”
—John Hussman
Looking at your 2009 date, the Dow was up 400% since then. And T-Bills? Were they up 400% since then? I love the way you selectively choose dates.
No more selective than the dates used agip post. The point is valuations always matter, and in regards to an index, the Dow is rarely used as an industry standard. Much to the chagrin of you and Flagpole.
Looking at your 2009 date, the Dow was up 400% since then. And T-Bills? Were they up 400% since then? I love the way you selectively choose dates.
No more selective than the dates used agip post. The point is valuations always matter, and in regards to an index, the Dow is rarely used as an industry standard. Much to the chagrin of you and Flagpole.
Igy - you have mentioned Grantham before. He said in April an 85% of a stock market crash this year. Would you agree that he is a nutjob? Or will the market crash this year?
I just want to know if Igy agrees with Grantham that he agrees with Grantham's prediction of a 85% stock market crash this year. Simple yes or no. You agree the market will crash or you don't agree.
No more selective than the dates used agip post. The point is valuations always matter, and in regards to an index, the Dow is rarely used as an industry standard. Much to the chagrin of you and Flagpole.
Igy - you have mentioned Grantham before. He said in April an 85% of a stock market crash this year. Would you agree that he is a nutjob? Or will the market crash this year?
No, legendary. The NASDAQ lost 86% 2000-2002, not to reach new highs for over 16 years. Historical multiple for S&P 500 is 16, with EPS falling to under $100 during Covid low. That gets one to 1600 fair value, or about 65% from the 4796 high. In a severe bear market EPS likely below $100 and multiple of 12, which would get you down ~85%. I prefer down 65% from the high, which would correspond to the 2000 1550 and 2007 1575 highs. You really need to reorient your thinking on how much this market is dependent on low interest rates, Fed/Treasury liquidity, and Government stimulus/transfer payments. I suppose there is some logic for that to continue well into the future, but don’t expect inflation to ebb.
Interesting take on US inflation. I've been saying all along that much of the weirdness of US econ numbers is because of the difficulty in measuring inflation. Getting to a 'real' rate of anything depends on your read on inflation, and that can range from 2-6% at this point.
Also explains the inverted yield curve. The market (10-year) has been saying inflation is 2-3%. The Fed (1-2 years) has been saying inflation is 4-5%.
If core inflation came in just below 3%, the Federal Reserve would breathe a huge sigh of relief, stocks would head to the races and consumers could relax about the rising cost of living. It isn’t merely a dream: Measure U.S. price changes the way Europe does, and inflation was already there in May. Measure them as the U.S. does, and on Wednesday new figures are predicted by economists to show core inflation far higher, at 5% for June. The U.S. and Europe use different methods to calculate inflation data, but the Bureau of Labor Statistics calculates American price rises the European way too, although the statistic remains obscure.
Consumer prices climbed at a 3% annual pace in June, a significant slowdown from May's 4% increase. Still, inflation remains above the Fed's 2% target.
I realize my suggestion of looking at composition of SP500 didn't get much traction in this discussion, but I'm curious whether any of the regular contributors have an understanding of what tends to drive market gains. For general information, the index is comprised of 11 sectors: energy, materials, industrials, consumer discretionary, consumer staples, health care, financials, information technology, communications services, utilities and real estate.
Can anybody in the discussion rank these sectors in terms of which dominate by market capitalization? Or at a minimum, name the biggest 2 or 3 and the smallest 2 or 3?
As a bonus question, can anyone say which sectors have been the best and worst performers over the last year? Last 2 years? 5 years? 10 years? 30 years?
Keen to know if any of this detail seems pertinent to any market nerds other than me. If you think this kind of detail is irrelevant, maybe say why you think so.
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