One of the great truisms in investing is that it is difficult for professional investment managers to beat the Standard and Poor 500 (Index: SP 500) with any regularity over time.

According to S&P Global, the market capitalization-weighted S&P 500 beat over 88% of all Large-Cap stock funds over the last 15 years. The index' relative outperformance over these funds over the decades it has been around has resulted in the S&P 500 becoming the benchmark by which the professionals measure their performance.

In a 2023 paper, Rob Arnott, Chris Brightman, Xi Liu, and Que Nguyen propose a method by which it might be possible to regularly beat the S&P 500 by improving how it selects the component stocks the index adds and removes over time. They note that the index frequently adds overvalued stocks while deleting temporarily undervalued stocks, which lowers the index' returns for investors. They argue there's a practical way to avoid the lower returns that result from this practice.

Here's how they describe their approach:

What if we no longer chase soaring winners and abandon tumbling losers, and instead choose stocks based on a more stable metric, namely, the size of the underlying business? Suppose we select stocks based on their economic scale, their relative size in the macroeconomy, rather than on the market’s expectation of the company’s future success. This strategy will come very close to matching the portfolio held by existing cap-weighted indices. Big businesses are usually large-cap and small businesses are usually small-cap. Thus, if we select stocks based on the economic scale of the underlying business rather than on market-cap, the result is a portfolio with superb liquidity and capacity, fully comparable to popular and commercially available market-cap indices.

We propose the creation of a broad-market capitalization-weighted index by selecting the constituents using fundamental measures of the size of the underlying company, and cap-weighting them. We call this Fundamental-selection Cap-weighted (FS-CW) index. Instead of cap-weighting the largest market-cap stocks, we would be cap-weighting the largest businesses. Additions will be companies that have grown onto the list of the largest businesses, important enough in the macroeconomy to matter, instead of stocks that have soared onto the list of the most popular companies. Deletions will be companies that have diminished in macroeconomic scale, by enough to no longer matter, instead of unloved stocks that have tumbled off the list of the largest market-cap stocks.

How well does that work compared to how the S&P 500 selects its component stocks today? Here's the conclusion to their paper where they summarize how their proposed improvement to an S&P 500 index fund performs in comparison to the benchmark performance set by the current version of the S&P 500 index:

By construction, a cap-weighted index puts more of an investor’s money into overpriced stocks and less into underpriced stocks, but—as indexers will happily point out—How to know which is which. That said, why should we hasten that process by mostly adding stocks based on newly elevated market-cap, when they are priced at “peak froth,” and mostly dropping stocks just after their market-cap has cratered, priced at “peak fear”? We propose a better way to create a cap-weighted index. Using FS-CW, which bases additions and deletions on a company’s fundamental measures and thus de-links index constituents from the stock’s recent price movement, we can create a superior cap-weighted index fund.

With this simple expedient, FS-CW US 500 earns 46 bps of annualized excess return (with less risk!) versus the S&P 500 in a 30-year historical simulation. The live results of the FS-CW model portfolio, since launched in September 2021, have exhibited a stronger outperformance. An additional benefit of this index is that by anchoring index stock selection with fundamentals, we can lower portfolio turnover and potentially markedly reduce trading costs.

Investors can benefit most from the Fundamental-Selection Cap-Weighted index where and when equity markets are less efficient and thus offer more mispricing opportunities. FS-CW’s live portfolio performance, in markets around the world, supports our findings that the index can provide greater outperformance during market turbulence and in higher-volatility markets. After adjusting for relative risk—with FS-CW offering slightly lower turnover in most markets—the result is a superior cap-weighted index, improved by largely eliminating the buy-high/sell-low dynamics inherent in the rebalancing process for most commercially available indexing products.

Given how hard it is for professional investment managers to beat the S&P 500 already, imagine how hard that might become if the method by which the index adds and deletes its component stocks can be easily tweaked to deliver even better returns. It will be interesting to see how well the authors' 'improved' version of the S&P 500 truly performs over time.

References

Rob Arnott, Chris Brightman, Xi Liu, and Que Nguyen. Reimagining Index Funds. Journal of Investment Management, Vol. 21, No. 4. pp 15-31. 2023. DOI: 10.2139/ssrn.4591461. [Ungated PDF document].

Image Credit: Microsoft Copilot Designer. Prompt: "An image of a wall filled with electronic stock ticker data that has the words 'INDEX FUNDS' shown in white letters in one corner".

The shutdown of parts of the U.S. government is causing some minor inconveniences to people who use economic data generated by several of the agencies that have been shuttered because the U.S. Congress hasn't authorized funding for them.

One example came and went last week, when the jobs report for September 2025 went unpublished because the Bureau of Labor Statistics is one of the shuttered agencies. Fortunately, there is an alternate source for much of the data that report contains.

Another example of BLS data that's at risk of going unpublished is the Consumer Price Index (CPI) news release for September 2025. Data for this report was collected during the week containing the 12th of September and if the BLS were open, would be released on 15 October 2025. There is however a very good chance the BLS will still be closed when this date rolls around.

That matters because the CPI says about inflation in the U.S. can impact how and when the Federal Reserve might act to change interest rates. That in turn can affect how stock and bond prices change.

Fortunately, like the BLS' nonfarm employment data, there is an alternative to the BLS' CPI data! The Billion Prices Project was developed by Alberto Cavallo and Roberto Rigobon back in 2008. Ten years later, the project had evolved into PriceStats, which partnered with the investment house State Street, which makes that data available to its clients.

That's one path to get high quality inflation data that parallels the BLS' CPI data. Another path to the data is provided by Cavallo through Harvard Business School's Pricing Lab. On that count, Cavallo and Gaston Garcia Zavaleta published a NBER working paper last month that features the following chart showing how the modern incarnation of PriceStats data compares with the Consumer Price Index in the period from January 2021 through July 2025:

What this chart shows is that aside from whatever prompted the BLS' CPI measure to jump in value around and after July 2022, the two measures closely parallel each other. That makes the PriceStats data very useful for anticipating what the CPI value will be. What's more, because its updated daily and because its data doesn't rely on the BLS to collect it, PriceStats data arguably could and should replace the BLS' consumer price inflation data for most practical applications.

Once again, we find that analysts have a solid alternative to important economic data because there is a high quality private sector alternative to the BLS' "official" data. The important takeaway here is that if the data is important enough, people who value it will find ways to get better and more timely versions of it.

References

Alberto Cavallo and Gaston Garcia Zavaleta. Turning Points in Inflation: A Structural Breaks Approach with Micro Data. National Bureau of Economic Research Working Paper 34102. DOI: 10.3386/w34102. [Ungated PDF document]. 21 September 2025.

When the U.S. government shut down on Wednesday, 1 October 2025, the Bureau of Labor Statistics also shut down. Because the BLS shut down, the September 2025 jobs report was put on hold until such a time the Congress passes a bill to fund its operations.

For us, that's a minor inconvenience because we use the BLS' jobs data paired with age demographic data to track the employment situation for U.S. teens. While we'd like to have the latest data, we really don't expect it to show any major changes from when we last covered the teen jobs scene.

For others, the absence of the BLS' jobs data could be a bigger inconvenience. Especially analysts who use the data to divine how institutions like the Federal Reserve might adapt monetary policy because of how the jobs data is changing.

That's why it is a huge mistake to only rely on the BLS for jobs data. Fortunately, the BLS doesn't have a monopoly on what many analysts consider to be the most useful portion of its jobs report: its seasonally adjusted estimates of the total number of jobs being done in the U.S. by the nonfarm workforce.

Private sector firms like Revelio Labs have developed independent estimates of total nonfarm employment in the U.S. economy that doesn't rely on whether the BLS' data jocks have approved funding to do their jobs. Or even if they do it as well as needed, as has come into question in recent years.

Either way, the current shut down makes independently developed estimates especially useful. We tapped Revelio Labs' data for seasonally adjusted total nonfarm employment in the U.S. to compare their estimates with those of the BLS in the period from January 2022 through September 2025. Or really, from January 2022 through August 2022 because there is no BLS estimate for September 2025 at this writing. The following pair of charts shows this data and also how it changed from the preceding month:

Revelio Labs' describes what makes their total nonfarm employment estimates different from the BLS' estimates in the press release reporting their initial September 2025 estimate:

RPLS is a freely available macroeconomic labor market set of statistics built from 100+ million U.S. profiles to provide a clear view of workforce dynamics. It follows a format similar to the U.S. Bureau of Labor Statistics (BLS), tracking employment levels, wages, and job transitions at a scale that traditional surveys cannot, offering a continuous picture of the labor market. RPLS intends to close the growing information gap and deliver unbiased data on the U.S. workforce for policymakers, businesses, and the public....

Powered by a dataset representing close to the whole population of employed people in the United States, Revelio Public Labor Statistics (RPLS) draws from 100+ million U.S. profiles that mirror the national workforce and cover two-thirds of all employed individuals, compared to an estimated 27% from the BLS establishment survey and 0.03% from the BLS household survey.

The quality of the BLS' employment estimates have deteriorated because the size of its sampling of U.S. employers plunged during the 2020's coronavirus pandemic and has not recovered, which gives the BLS a much less complete picture of the nation's employment situation than it had before. Meanwhile, the BLS has used statistical models to try to compensate for that core problem, which have proven to fall wide of the mark in recent years. These problems have led the BLS to miscount total nonfarm employment, which has resulted in the BLS having to issue two major revisions to its estimates in the last 14 months.

All of which has made the BLS' employment situation data less than optimal for policy makers who use it to set their policies. Fortunately, there are alternatives to the BLS' data that can complement it by helping provide a more complete picture of the employment situation in the U.S. Or that can provide a reasonable overall picture when the BLS' jobs numbers aren't available.

Do check out Revelio Labs' total nonfarm employment data and its other data products. They provide a lot more detail than we've covered in this article.

References

Revelio Labs. Total Nonfarm Employment National. [CSV Data]. 2 October 2025.

U.S. Bureau of Labor Statistics. Total Nonfarm Employment. Current Employment Statistics - CES. [Online database]. Last Updated 5 September 2025.

Image credit: Big Data by Learntek on Flickr. Creative Commons CC0 1.0 Universal Deed. Public Domain.

At one minute past midnight on 1 October 2025, much of the U.S. government shut down because of a political impasse and it stayed shut down through the rest of the trading week. Investors reacted by sending the S&P 500 (Index: SPX) to new record high closes on each trading day of this latest shutdown.

On Friday, 3 October 2025, the index closed at 6,715.79, just a hair up over its previous day's close but also 1.1% higher than it closed in the preceding week.

Much of that gain came as the week's news flow indicated the U.S. economy experienced sluggish job growth through the end of September 2025. The apparent sluggishness increases the probability the Fed will have to cut U.S. interest rates further to stimulate job growth, the expectation for which boosted stock prices.

The CME Group's FedWatch Tool projects two more quarter point cuts in 2025, coming on 29 October (2025-Q4) and 10 December (2025-Q4). In 2026, the FedWatch tool's forecast anticipates a slower pace for additional rate cuts, with quarter point rate cuts on 18 March (2026-Q1) and 17 June (2026-Q2).

That's one more rate cut in the first half of 2026 than was expected a week earlier. The latest update of the alternative futures chart shows the trajectory of the S&P 500 is consistent with investors fixing their attention on the distant future quarter of 2026-Q2.

Although the U.S. government shutdown dominated news headlines during the trading week ending on Friday, 3 October 2025, investors essentially shrugged it off as a nonfactor. As they should, seeing as it is little more than a political noise event. Here is our summary of the week's more significant market-moving headlines:

Monday, 29 September 2025

• Signs and portents for the U.S. economy:
• US pending home sales rebound in August amid low mortgage rates
• Oil prices drop 3% as OPEC+ plans for oil output hike
• Exclusive: OPEC+ plans another oil output hike in November, sources say
• Fed minions still sending mixed messages:
• Fed's Williams: Recent rate cut aimed at bolstering job market
• Fed's Musalem: Open to further cuts but must be cautious
• Fed's Miran sees Trump economic overhaul driving down rates, others see a risky bet
• Fed's Hammack says US needs to maintain restrictive policy amid inflationary pressures
• Bigger trouble developing in China:
• China's factory activity likely slows again amid weak demand, trade tensions - Reuters poll
• Japan's economy improves, BOJ minions gearing up to hike Japan's interest rates:
• Japan says economy recovering but US tariff impact seen in auto sector
• BOJ board's hawkish flex lowers bar for an October rate hike
• S&P 500 closes higher as AI leader Nvidia rebounds, EA surges on takeover
• S&P 500, Nasdaq climb as investors brush off shutdown woes, hawkish talk
• Nvidia leads chip stocks higher to start the week
• 'Battlefield' maker Electronic Arts to go private in record-setting $55 billion LBO

Tuesday, 30 September 2025

• Signs and portents for the U.S. economy:
• Moderate US job openings, weak hiring underscore softening labor market
• US auto bankruptcies show rising credit pain in low-income households
• Oil price outlook steady as rising supply offset by concerns over Russian output
• OPEC+ mulls speeding up oil output hikes again, sources say
• Oil companies slash jobs by the thousands as prices fall, tariffs rise and industry consolidates
• Fed minions claim they want more data before more rate cuts, say they'll use "other" data if they can't get it from government:
• Exclusive: Fed's Collins cautions against aggressive rate cuts given inflation issues
• Fed's Collins notes openness to cutting rates again depending on data
• Fed's Goolsbee: Will need to turn to other data sources if US reports suspended during shutdown -Fox Business
• Government shutdown impact on economy depends on length, breadth of outage, Fed's Goolsbee says
• Fed's Jefferson says he has not considered whether to remain as governor after vice chair term ends
• Bigger trouble, stimulus developing in China:
• China factory activity shrinks again as firms watch for stimulus, US trade deal
• ECB minions say Eurozone inflation totally under control:
• Euro zone inflation risk quite contained, Lagarde says
• Euro zone inflation data points to uptick on slower energy price fall
• Dow closes at record high, S&P 500 logs winning month, as investors shake off government shutdown concerns
• Wall Street indexes close higher with quarterly and monthly gains even as US government shutdown looms

Wednesday, 1 October 2025

• Signs and portents for the U.S. economy:
• Oil slides to 16-week low on US and Asia economic worries, and expected OPEC+ production increase
• US manufacturing eyes recovery in September, orders contract
• U.S. government shutdown officially begins
• Government shutdown updates: Trump administration says layoffs coming in days
• US private payrolls fall in September
• Fed minion wants to see more layoffs, more rate cuts more likely:
• Fed's Logan: US may need more slack in job market to hit 2% inflation
• The government shutdown is likely to cement additional Fed interest rate cuts
• Supreme Court lets Fed Governor Lisa Cook keep job pending January oral argument
• Bigger trouble developing in China:
• Factories struggle in September as soft demand in China and US take toll
• ECB minions thinking about letting current Eurozone interest rates ride:
• Euro zone inflation picks up, bolstering ECB's case for staying on hold
• S&P 500 notched a record close as Wall Street rallied despite the government shutdown
• Wall St rebounds as rate-cut hopes temper shutdown worries
• S&P 500 rises to new record, reversing earlier losses as traders bet on short-lived shutdown
• S&P 500 10 best and worst performers of 2025 as Q3 closes

Thursday, 2 October 2025

• Signs and portents for the U.S. economy:
• Oil falls 2% to four-month lows on oversupply concerns
• With the US government dark, alternate sources show a sluggish September for jobs
• US layoffs fall in September but year-to-date planned hiring at lowest in 16 years
• US government shutdowns raise uncertainty but rarely have lasting effect on economy
• Fed minion says Fed needs to be cautious when changing US interest rates:
• Fed's Logan says US central bank must be 'very cautious' on rate cuts
• Wall Street ended in the green on day two of the government shutdown
• Wall Street closes with records as tech support offsets labor, shutdown uncertainties

Friday, 3 October 2025

• Signs and portents for the U.S. economy:
• Oil posts 8% weekly loss on potential OPEC+ supply additions
• OPEC+ set for another oil hike as Saudi and Russia debate size, sources say
• Shutdown puts jobs data on ice, fogs reading of economy
• For a jobs day data fix in a US shutdown, here is what the experts are saying
• Who Needs The BLS: US Added 60,000 Jobs In September, Best Month Of 2025
• Fed minions say they're preparing for the unexpected, others send more mixed messages about prospects for more rate cuts:
• Fed's Williams says central banks must prepare for the unexpected
• Fed's Miran wants aggressive rate cuts but downplays differences with other officials
• Fed's Jefferson repeats job market could face stress without support
• Fed's Goolsbee a 'little wary' of front-loading too many rate cuts -CNBC
• BOJ minions / Bigger trouble developing in Japan:
• BOJ's Ueda warns of global uncertainty, keeps markets guessing on next hike
• S&P 500 posts winning week, but Friday rally fizzles
• Dow, S&P 500 manage record closing highs; Nasdaq falls in volatile session
• No payrolls, no problem as Wall Street extends run of highs

The Atlanta Fed's GDPNow tool projection of real GDP growth in the U.S. during the current quarter of 2025-Q3 ticked down to +3.8% after last week's forecast of +3.9% annualized growth.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull who is happy the S&P 500 is at new record highs, while a news ticker says 'WHAT SHUTDOWN?'"

The pages of the calendar have turned forward to October once more. In the northern hemisphere, the days are getting shorter, their warmth becoming more and more fleeting. Increasingly bare branches on trees reach out like the fingers of skeletons that move as chilled winds blast through them. Nights are getting longer and seemingly darker.

In short, the conditions and circumstances of "spooky season" have returned. The growing sense of the season's eerie dread will only end after October 31, when Halloween has come and gone and we can turn our full attention to the coming winter.

The Inventions in Everything team likes to celebrate the arrival of the spooky season by exploring the patents whose inventors see opportunity in the celebration of the macabre. Which naturally leads to our latest featured innovation, given unending life in the form of U.S. Patent 7,627,935: the Doll Urn.

It's inventor, Deborah R. Ostrum, was awarded a patent for her invention that stores the cremated remains of loved ones inside dolls on 8 December 2009. Figures 1 and 2 of the patent illustrate her vision, depicting how the ashes of the dead might be kept within what we would describe as "creepy" dolls:

Inventor Ostrum makes plain the purpose of her innovation in the Background of the Invention portion of the patent:

The present invention features doll urn for storing a human's or a pet's ashes. The doll urn comprises a doll body, a doll head, a doll top, and a voice recorder for recording or playing a message. Disposed in the doll head is an internal compartment, wherein a secure container for holding the ashes may be inserted into the internal compartment via an aperture on the doll head. The doll top comprises a stopper for fitting into the aperture so as to prevent ashes from spilling out of the internal compartment.

Having a secure container for holding cremated remains within the body of a doll is important, less an unsuspecting, innocent child unleashes the deceased's remains while playing with what they might think to be a simple toy.

But the creepiness factor of Ostrum's invention cranks up to unnatural levels when you consider the full range of customization she envisions:

The doll urn may be constructed in a variety of shapes, sizes, colors, and/or designs to shape and look like the deceased. For example, in the doll urn is a female doll or a male doll. In some embodiments, the doll urn is a dog, a cat, a bird, or the like. in some embodiments, the doll urn features brown yes, blue eyes, green eyes, or the like. In some embodiments, the doll urn features short hair, long hair curly hair, straight hair, shoulder-length hair, brown hair, blonde hair, red hair, black hair, white hair, gray hair, the like, or a combination thereof. In some embodiments, the doll urn features dark skin, light skin, medium-toned skin, or the like. in some embodiments, the doll urn features a dress, a skirt, a shirt, a pair of pants, a pair of shorts, a hair ribbon, a headband, a bracelet, a necklace, a watch, the like, or a combination thereof.

Dolls holding the remains of the dead, intended to closely resemble them while alive, that you can keep on display in your home.

But wait, that's not all!

Her patent adds features to allow the doll to play a pre-recorded message from the deceased. If you weren't already unsettled by imagining a figure that looks like the dearly departed whose purpose is to hold their remains, imagine your unease when it plays their pre-recorded message to you from beyond the grave.

Are you properly scared yet? Because if you're not, we have other inventions we've previously featured that might finish the job....

From the Inventions in Everything Archives

The IIE team has previously covered the following "scary season" inventions:

• Outside the Box Thinking: The Ghost Chair
• Inventions in Everything: Life Support for Severed Heads
• Inventions in Everything: Pure Nightmare Fuel
• Inventions in Everything: Carvable Artificial Pumpkin
• Inventions in Everything: The COVID Candy Chute
• Inventions in Everything: Opening Doors in a Virus Filled World
• Chairs to Haunt Your Dreams This Hallow's Eve
• Happy Holographic Halloween!
• Self-Carving Pumpkins