I think it's less about animal spirits and more about granularity. If I only own index funds, I am forced to panic sell the whole market. If I instead own 10-20 stocks, I'm only affecting a fraction of the market.

In the dot com bubble, not everything popped. Many stocks went up as people fled tech and went into "safer" sectors. So it does seem that broad index hegemony has the potential to exacerbate a nasty crash.