SynopsisJefferies' Chris Wood says investing in SpaceX is ultimately a bet on Elon Musk rather than valuation metrics. He highlighted the explosive demand for leveraged SpaceX ETFs and warned that changes to index inclusion rules could reshape passive investing, further strengthening the dominance of US equities in global benchmarks.APJefferies' Global Head of Equity Strategy Chris Wood believes valuation concerns are unlikely to stand in the way of investors buying shares of Elon Musk's SpaceX, arguing that investments in Musk-led companies are driven more by faith in the entrepreneur's vision than by pure fundamentals. In his latest GREED & fear report, Wood noted that he has been a long-term personal investor in Tesla, adding that this is one reason the stock does not feature in any of GREED & fear's long-only portfolios. According to him, the frenzy surrounding SpaceX's market debut offers another striking example of the retail-driven momentum currently shaping US equity markets.Wood backed it up by highlighting the extraordinary activity seen in leveraged SpaceX exchange-traded funds (ETFs) within days of the company's listing. A total of 11 new SpaceX single-stock leveraged ETFs launched on Monday and amassed combined assets under management of $638 million as of Wednesday. Despite that relatively modest asset base, the funds generated a combined $8.2 billion in trading volume within just three days of listing.He also pointed to the Defiance Daily 2X Space ETF (SPCL), which launched in April as a space-themed ETF and converted last Friday into a fund offering 2X daily leveraged exposure to SpaceX on the day of the IPO.Also read: Aswath Damodaran's warning on trillion-dollar fight over SpaceX and OpenAI in world's most powerful stock indexLong-standing rules changed for SpaceX Beyond the ETF frenzy, Wood argued that the most important development surrounding the SpaceX IPO was the willingness of index providers to alter long-standing inclusion rules. He described this as a highly significant event for the asset management industry, with the notable exception of the S&P 500, which retained its existing framework.Historically, newly listed companies were required to undergo a seasoning period before entering major indices. This meant waiting three months for inclusion in the Nasdaq-100, a quarterly review cycle for Russell indices, or more than a year along with four quarters of GAAP profitability before becoming eligible for the S&P 500.According to Wood, such a process allowed markets to engage in price discovery while free float accumulated, ensuring that passive investors were not the marginal buyers of unproven securities. He argued that the recent pressure on index providers to accelerate inclusion rules was aimed at triggering passive investment flows into newly listed stocks.MSCI, meanwhile, is also moving quickly toward including SpaceX, though Wood pointed out that no rule changes were necessary. MSCI's methodology already contains provisions for fast-tracking large IPOs, allowing inclusion after 10 trading days if specific size thresholds are met. Large listings may also qualify despite having relatively low free float levels.Read more: SpaceX shares decline for first time since blockbuster debutThe inclusion of a company of SpaceX's size would further increase the dominance of US equities within global benchmarks. The US currently accounts for 62.9% of the MSCI AC World Index, below the all-time high of 67.2% reached in late December 2024.According to Wood's estimates, if SpaceX enters the index with a 10% free-float inclusion factor, it would receive a weighting of about 0.25% based on its current market capitalization, lifting the US weighting to 63.0%. If a 25% inclusion factor is applied, SpaceX's weighting would rise to about 0.6%, increasing the US share of the MSCI AC World Index to 63.1%.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless(You can now subscribe to our ETMarkets WhatsApp channel)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless