Is passive the new active?

A Note From Dexter

The most consequential financial decision most Americans made this decade was not which stocks to pick or which fund manager to trust. It was the decision to stop deciding. To put retirement savings into index funds and let the market do the work.

That decision made sense when it was made. It may still make sense for your specific situation. But this week it got significantly more complicated.

The world's largest IPO in history just happened. And whether you wanted it or not, it is likely headed for your retirement account. The rules that were supposed to protect you from exactly this kind of exposure were changed overnight by the exchanges that had the most to gain from changing them.

This is what passive investing looks like in 2026.

[You can catch up on last week's issue here.]

Dexter Pierce, Founder

In This Issue

• The world's largest IPO and your 401k. What happened, which indexes changed their rules and what the S&P 500's refusal to follow tells you.

• A 46-year-old tried to opt out. He could not. The human face of what index rule changes actually mean for ordinary retirement investors.

• The government may become your investment partner. What the proposed federal equity stake in AI companies means for the risk inside passive retirement funds.

• The question worth asking this week. Do you know which specific indexes your retirement funds track and what the rules are for what goes into them?

This Month's Numbers

$1.77 trillion — SpaceX's IPO valuation this week. The company lost $4.9 billion last year. It is now the largest IPO in history, larger than Saudi Aramco's 2019 offering and larger than Meta's entire market capitalization.

15 days — How long before SpaceX enters the Nasdaq-100 index after going public. Nasdaq changed its rules specifically to allow this. FTSE Russell followed. Morningstar CRSP followed. The S&P 500 did not.

37% — The share of total US household wealth now sitting in equities. A record high. More of what Americans have built is market-dependent than at any previous point in history.

50% — The tax Senator Bernie Sanders proposed on AI lab stock to fund a US sovereign wealth fund. If passed it would cut the value of AI positions in retirement accounts in half overnight. It has not passed. It is in active political discussion.

This Month's Story

The Index Rule Change Nobody Voted On

Ian Yarbrough is 46 years old. He works in utilities at Indiana University in Bloomington. He has a retirement fund and has put money into index funds. He has long been skeptical of the hype around AI companies and has deliberately avoided them in his investing.

When he heard that SpaceX would likely be included in index funds he holds almost immediately after its IPO, he tried to make changes. After finding his brokerage made it difficult to avoid funds invested in AI companies, he gave up.

"It doesn't feel like anybody is watching out for retail investors or the common person anymore," he said. "It feels like the system is rigged against us."

Ian Yarbrough is not a financial sophisticate making aggressive bets. He is a passive investor who made the decision most financial advisors recommend. Set it and forget it. Trust the index. Let diversification do its work.

This week that decision was made more complicated by a set of rule changes he never agreed to.

Here is what happened. SpaceX, Elon Musk's rocket company, priced its IPO at $135 a share this week. At that price it is valued at $1.77 trillion despite reporting a loss of $4.9 billion last year. It is the largest IPO in history.

Most companies that go public must wait at least a year before being considered for inclusion in major stock indexes. That seasoning period exists to protect investors from the volatility of newly public companies and to ensure the company has a track record of transparent financial reporting. SpaceX told the major indexes it wanted to be included quickly. Nasdaq, FTSE Russell and Morningstar CRSP changed their rules to accommodate that request. SpaceX will enter the Nasdaq-100 index within 15 days of going public.

One index provider held firm. S&P Dow Jones Indices announced it would not change its eligibility criteria for the S&P 500. Under existing rules SpaceX must trade publicly for 12 months, maintain a minimum float and demonstrate four consecutive quarters of positive net income before it can be considered. Since SpaceX lost $4.9 billion last year it fails the financial viability screen immediately. It will not be eligible for the S&P 500 until at least mid-2027.

That distinction matters more than most people realize. If your retirement funds track the S&P 500 you are not getting SpaceX yet. If they track the Nasdaq-100 you are getting it in two weeks. Most passive investors do not know which specific indexes their funds track. They know they own index funds. The rules governing what goes into those indexes are a level of detail most people have never been asked to consider.

The story did not end there. President Trump said this week that the federal government may take equity stakes in AI companies including OpenAI, Anthropic and SpaceX as part of what he called a partnership. The administration has already taken stakes in Intel and rare earth startups. Senator Bernie Sanders proposed a 50% tax on AI lab stock to fund a US sovereign wealth fund. OpenAI's CEO has advocated for the government taking a stake in his company and has been meeting with lawmakers in Washington this week.

The passive investor who holds Nasdaq-100 index funds is now potentially holding shares in companies where the federal government is simultaneously a partner, a regulator and a potential taxing authority. That is not a risk most passive investors understood they were taking when they chose not to choose.

The Cook Pierce Perspective

The assumption that index investing removes you from complicated financial decisions is not holding up this week.

Choosing an index fund is itself an active decision about which index, which rules, which exposures and which risks. Most people made that decision once and stopped thinking about it. This week the landscape those decisions were made in shifted in ways that most investors did not see coming.

This week on our website we look at what genuinely passive retirement income actually looks like and why the income floor underneath market investments matters more in this environment than it has in years.

[Read the full Cook Pierce Perspective on our website]

The Long View

Whether SpaceX's $1.77 trillion valuation signals a market top or the beginning of a genuine investment super-cycle is a question nobody can answer with certainty right now.

$6.9 trillion was spent globally in 2025 on AI, clean energy and defense. That number could reach $16 trillion by 2030 as these sectors reinforce each other. There is a credible case for genuine and sustained growth. There is an equally credible case that the froth is getting ahead of the fundamentals.

Both cases are honest. Neither is certain. And a retirement plan that requires knowing which one is correct is a retirement plan carrying a risk most people have not named.

On our website this week we examine what that uncertainty means and what a retirement plan built for the range of outcomes actually looks like.

[Read The Long View on our website]

The Question Worth Asking

Do you know which specific indexes your retirement funds track and what the rules are for what goes into them?

Most people know they own index funds. Very few know the rules governing what goes into those indexes. This week those rules changed for millions of Americans. This week's answer on our website explains what to look for and why it matters.

[Read this week's answer on our website]

The Closer

The retirement plan that does not require the right index decisions to be made on your behalf is the one built on a foundation that does not move when index rules do.

The best financial plan is not the one that predicted what happened this week. It is the one that was already built for it. Protection in place before the rules changed and a foundation solid enough that what Nasdaq decides on any given Tuesday does not determine what happens in your retirement.

That is not luck. That is order.

Next week we go deeper. The market is not a pricing machine. It is a flow machine. And understanding the difference changes how you think about everything in your retirement account.

This week's sources include reporting from the New York Times, the Financial Times and The Economist.