Tesla's Inclusion In S&P 500 'Declaration' That EVs Are 'Our Future,' Analysts React

The news that Tesla Inc TSLA will soon be included in the S&P 500 index has led to exuberance among some analysts but also left them wondering how it would affect the index.

Long-Due Recognition For EV Market: The Elon Musk-led company's inclusion in the index is "confirmation," "declaration," and  "recognition" that "electric vehicles are our future and that they’re finally going mainstream," according to Joanne Lipman, a journalism fellow at the Institute for Advanced Study, CNBC reported Monday.

“Every other automaker that is rushing in to try and compete with Tesla....So much of this has to do with the charisma of Elon Musk...People are trying to get the next Henry Ford,” said Lipman.

Aswath Damodaran, professor of finance at New York University’s Stern School Of Business, theorized that when it comes to EV being the market of the future, Tesla will be "the leader" but other automakers, including General Motors Company GM, Ford Motor Company F, or Volkswagen AG VWAGY, set to benefit too.

S&P 500 Baffled: Jim Cramer, the host of CNBC’s “Mad Money” program thinks S&P 500 is baffled and doesn’t know how to handle Tesla's inclusion.

“I don’t know what they would do. I mean ... they can’t knock out the smalls. It doesn’t do anything. When they balance this ... they almost seem to have to make everything smaller,” explained Cramer.

Tiffany McGhee, CEO of Momentum Advisors, revealed the whole situation is “interesting” for her. “[Index funds are] going to have to sell positions to mimic the index," explained McGhee. " They’re going to have to buy Tesla.”

Benjamin Lau, the chief investment officer of Apriem Advisors, disclosed that he was worried about how Tesla’s inclusion affected their index funds and passive holdings more “than anything else.” Lau thinks the funds and holdings could become more volatile, the Wall Street Journal reported.

Comes As No Surprise: Josh Brown, CEO of Ritholtz Wealth Management, remains indifferent to the development. “If you’re managing money in an index strategy, it’s not like the old days where the announcement happens and you have to buy that day.”

Brown said he wouldn’t be surprised if funds had made some “anticipatory trades” a couple of months ago when it was “obvious [S&P 500] would have to add the company.”

“I think everyone knew it was just a matter of time. So, I don’t really look at that as a catalyst to want to buy it or sell it,” said Brown.

Price Action: Tesla shares closed 8.21% higher at $441.61 on Tuesday and fell 0.75% in the after-hours session.

See Also: Tesla Analyst Reacts To S&P 500 Inclusion: A Victory For Bulls