30 karma · joined July 9, 2022
No the s&p 500 is not "everything", it is one, albeit very popular, index. There are many others, but the underlying concepts are the same. Further, the companies are not selected for long term performance. Ignoring some finer details, the s&p 500 is the largest 500 US companies by market cap. Perhaps you are confusing this with the DJIA which is hand selected, though not selected for long term performance by any means; rather, it is selected in a way to represent the economic landscape - how well it achieves this is a matter of debate for sure.
As workers pour money into these non-discriminating investments, hoards of people are blindly investing and skewing away from efficient markets. Everyone (scare quotes everyone) is just buying large swaths of everything all the time without regard to fundamentals.
It's all good as long as this continues, but a shift in enough people no longer believing this, will reduce demand and prices will go back down.
In other words, people just buy everything because there is no alternative. If enough stop doing that, prices will readjust downward because too many stocks are overvalued due to the current wisdom of buy regardless of price.