Beware Nvidia and the S&P 500 ‘index waltz,’ market-beating fund manager says “What happens to the rest of the fund industry when a few big stocks leave the market in the dust? They start to look really bad. Any fund manager who either doesn’t own these stocks, or who holds a more rational weighting in them, wakes up to find they “are underperforming the index and a number of their clients are jumping ship to invest in index funds,” Rochon says. Which has been pretty much the story for a while now. And these managers, like most human beings, respond out of self-interest to the incentives being presented to them. “Some of those managers, motivated not to lose their jobs, are throwing in the towel and buying up the index’s largest stocks in increasing numbers to curb their underperformance,” Rochon points out. These desperate purchases “propel these stocks to new highs,” and that in return makes other fund managers who are holding out look even worse. So they eventually give in and rush to buy the booming megacaps. It’s a vicious circle. (Or a virtuous one, if you happen to be holding the right stocks.)”