Uber’s stock saw a significant increase of 2.2% following the announcement that the company would be joining the renowned S&P 500 index. This news has sparked interest among investors who track the index, as it is expected to attract forced buyers of the stock.
On average, the addition of a company to the S&P 500 results in a 6.3% jump in shares from the previous day’s close to the next day’s opening, and an impressive 11.2% increase between the announcement and the actual inclusion in the index. For Uber, this move is not only advantageous in terms of stock performance but also signifies a remarkable milestone for the company, cementing its position as a major player in the U.S. equity market.
The S&P 500 has witnessed over 700 changes since 1995, and the inclusion of stalwart companies like Coca-Cola, Microsoft, and Walmart has contributed to its prominence and credibility. However, this year’s market rally has been largely driven by the popular “Magnificent Seven” stocks, namely Microsoft, Apple, Alphabet, Amazon, Meta, Tesla, and Nvidia.
Investors are increasingly drawn to passive funds that track the S&P 500, favoring long-term trends over temporary fads. This signifies a shift in investment strategy, with passive funds offering a cost-effective option due to their lower fees compared to active funds.
In addition to Uber, other companies joining the index include Jabil and Builders FirstSource. Their inclusion showcases the resurgence of U.S. manufacturing and underlines the significant impact of ridesharing services on modern life.
It is worth noting that the turnover in the S&P 500 is primarily driven by significant events rather than scheduled rebalances. This ensures that the index provides exposure to all market developments, both positive and negative.
For most investors, the choice between passive and active investing is clear, with passive funds being the preferred option due to their ability to track the S&P 500 and capture overall market trends.