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Illustration: Aïda Amer/Axios

The most powerful actors in the financial world might well be the index providers. They essentially compel all passive investors when it comes to their asset allocation. They also create the benchmarks against which nearly all active investors are measured.

The state of play: When indices change, billions of dollars of money can end up moving as a result. When it comes to emerging markets, the two giants of the indexing world are the MSCI for stocks and the EMBI for bonds. When those indices are altered, all emerging-market fund managers, be they active or passive, will feel the consequences.

  • Index providers are susceptible to government coercion. China twisted MSCI's arm to try to persuade it to include Chinese stocks in its emerging market index. Meanwhile, Venezuelan politicians aligned with Juan Guaidó, who may or may not be the president of Venezuela depending on who you believe, want JPMorgan, which runs the EMBI index, to keep the country in the index, despite the fact that it's illegal for Americans to buy Venezuela's bonds.

The bottom line: Everything is susceptible to human biases, even supposedly objective indices. People think that the S&P 500 includes the 500 biggest stocks in America, for instance, but it doesn't: Tesla has never been included. If you can influence the people who determine what gets into the index and what doesn't, that's real power.

Go deeper

"Atmospheric river" swings Northern California from drought to flood

Satellite view of the bomb cyclone swirling off the coast of the Pacific Northwest and the atmospheric river affecting California on Oct. 24. Photo: CIRA/RAMMB

A series of powerful "atmospheric river" storms are delivering historic amounts of rainfall across parts of drought-stricken California and the Pacific Northwest — triggering widespread power outages and flooding.

Why it matters: The strong atmospheric river, packing large amounts of moisture, is causing Northern California to whiplash from drought to flood.

“You blew it”: GOP activist turns on corporations over vaccine mandates

The chairman of the American Conservative Union said on "Axios on HBO" he accepts "Joe Biden is my president, and I want him to succeed," but predicted Republicans retake the House and Senate in 2022 — with greater than 50% odds Donald Trump runs in 2024.

The big picture: In a joint interview with his wife, Mercedes, Matt Schlapp also refused to share their vaccination status. And he told corporate America "you blew it" by embracing vaccine mandates and liberal social stances that have alienated GOP voters and politicians.

3 hours ago - Politics & Policy

Pelosi expects “billionaire’s tax” to pay for Biden social spending

Photo: Yasin Ozturk/Anadolu Agency via Getty Images

House Speaker Nancy Pelosi (D-Calif.) said Sunday she expects the chamber to pass the bipartisan infrastructure plan by week’s end, and alternatives to corporate tax hikes and a “billionaires tax” will be used to finance President Biden’s promised expansion to the social safety net.

Why it matters: Pelosi’s comments come as House and Senate leaders try to wrap up a deal. What will get cut — and how the remainder will be paid — are linchpins to a final agreement.