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The S&P 500 inclusion effect springboard is back in a big way

It’s not unusual to see shares pop when a company is set to join the S&P 500, an index now linked to a staggering $20 trillion in global assets. Just last Friday, Block soared 10% after its inclusion was announced, while Datadog spiked 15% on similar news earlier this month. 

Known as the “S&P 500 Index Effect,” this short-lived bump is fueled in part by fresh demand from the $13 trillion worth of passive funds and ETFs that track the benchmark, which are required to buy shares of newly added companies.

But over the past decade, this effect had been losing steam. According to a 2023 Harvard study, the average announcement-day return for S&P 500 additions dropped from 9.4% in the 1990s to just 0.8% by the late 2010s — partially because markets got better at absorbing these shocks, and traders got better at predicting inclusions.

Now, though, a new Goldman Sachs analysis suggests the inclusion effect may be staging a comeback.

Since 2021, stocks newly added to the S&P 500 have outperformed the equal-weighted index by an average of 4 percentage points on the announcement day — with nearly three-quarters of those stocks beating the benchmark.

Source matters

One factor driving the revival is that fewer companies are migrating from the S&P MidCap 400 Index. Per Goldman’s estimate, stocks added from outside the S&P 400 have seen average relative gains of 5.3 pp since 2013, while those graduating from the midcap index actually dipped 0.4 pp.

Retail hype may also be adding fuel, with recent entrants like Coinbase, Super Micro Computer, Palantir, and Datadog already beloved by traders ahead of their debut — and tied to popular themes like AI or crypto. 

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Coca-Cola will now make a cane sugar version in the US, but Americans were already moving away from corn syrup

President Trump’s long and storied love for Coca-Cola — a love that, crucially, he shares with the rest of America — has reached something close to poetic justice.

After the president announced last Wednesday that Coca-Cola would use “REAL cane sugar” in its American recipe rather than corn syrup, the drinks giant officially confirmed plans this week to expand its drinks range with a sweetener-switched version — though, notably, without replacing syrup in the original.

While this came as great news for Trump, it was less pleasing for syrup producers, which saw their shares slump on the news. America’s favorite soda has used high-fructose corn syrup in its recipe since 1984; now, Coca-Cola’s pivot to refined sugar could signal a shift for ultra-processed food products.

Looking at the most recent USDA data, the average American consumed just under 124 lbs of caloric sweeteners in 2023, over half of which (55%) came from refined sugars. That’s lower than in the late 1990s, when sugar consumption peaked at ~157 lbs per head, though the amount of refined sugar consumed has stayed pretty constant.

Sugar consumption ballooned after the rapid uptake of high-fructose corn syrup in the mid-1970s, as the ingredient was marketed at half the cost of table sugar at a time when prices were soaring. But, in recent years, America has turned away from corn syrup, with per capita consumption of the sweetener down 30% from 1999 at the last count.

Kernel of truth

While the “Make America Healthy Again” movement has corn syrup in its crosshairs, experts have pointed out that both refined sugars and corn syrup are ultra high-processed products with a near-identical chemical composition — and America can’t make enough refined sugar as it is anyway. Per the WSJ, the US produces 4 million tons of cane sugar annually, which is already less than a third of what it consumes.

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Retail traders are fueling the options boom

Retail traders aren’t just dabbling in stocks anymore; they’re rewriting the rules of options markets. Since 2020, retail participation in options trading has skyrocketed from 10% to as much as 50% of total volume. The biggest winner? Index options.

Cboe^® SPX^® option volume is up 17% this year, with zero-day-to-expiration (0DTE) options now making up 61% of SPX trades — over half of that driven by retail. Platforms like Robinhood (which integrated with Cboe in 2024) have made it even easier to access these tools.

Why the surge? A strong bull market, commission-free trading, social media-fueled education, and the added thrill of leveraged trades — in addition to the many benefits of index options. The result: a retail revolution.

The fertility rate in the US has fallen to a new record low

New CDC data released Thursday shows that America’s fertility rate dropped to an all-time low of just under 1.6 children per woman on average in 2024.

For context, this is lower than the UN’s projection for the world’s overall rate (2.25), as well as the figure forecast for the US (1.62) in its World Population Prospects report for 2024. Imperatively, it also falls well below the replacement level of 2.1 — or, the birth rate required for a population to replace itself from one generation to the next.

Like much of the developed world, the US has seen its fertility rate slump in recent years as an increasing number of adults have decided to delay — or opt out of altogether — having kids, citing economic and social limitations (though it seems that many still can’t decide whether there are currently too many children or not enough).

Natal attraction

As plunging fertility rates worldwide have pointed to an impending global baby bust, governments are experimenting with incentives to encourage citizens to have more children.

Among these is the US, with raising the national fertility rate being one of the Trump administration’s priorities. Back in April, as part of their pro-natalist push, the White House reportedly considered a $5,000 “baby bonus” for new mothers.

Interestingly, last year saw a rare child-rearing win for the country with world’s lowest birth rate. South Korea’s birthrate rose for the first time in nine years to 0.75 in 2024, as reported in February, and just this week the country announced notching record birth growth in the first five months of this year.

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Retail traders make up nearly half of today’s options volume, with index options surging 127% since 2020, fueled by commission-free platforms, social media, and Robinhood’s offering of Cboe SPX^®, XSP^®, RUT^®, and VIX^® Index options.

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Off the charts: Which stock saw trading volume spike to nearly 300% of its market cap on Monday, blowing past every S&P 500 name? [Answer Below].

(Hint: It’s one of the new meme stocks to have emerged this week).

Answer here.

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