The S & P 500 could see one more big reshuffle before the year ends, with fourth-quarter changes to the benchmark stock index expected on Friday, Dec. 19. In a Wednesday note to clients, Stephens analyst Melissa Roberts pointed to three potential candidates that could get added to the benchmark in the next rebalance. “The most likely eligible adds could be 400 migrators — [ Comfort Systems ] (Industrials), [ Pure Storage ] (IT), and [ Ciena ] (IT) are the three-largest 400 members,” she wrote, referring to the S & P Midcap 400 index consisting of companies smaller than those in the S & P 500. Other candidates for potential inclusion due to their size include Carvana , CRH , Vertiv Holdings , Alnylam Pharmaceuticals and Ares Management , she added. However, Roberts noted that there may be few, if any discretionary changes given that the fourth quarter had the lowest historical rebalance turnover, and that a strong M & A pipeline exists for changes. “We believe any changes will focus on index clean-up and migrating oversized and undersized existing members,” she wrote. “New member market capitalization guidelines will likely move higher in early Jan. due to market strength, which may limit add opportunities for companies near current cut-offs.” An S & P Dow Jones Indices committee inside S & P Global makes the final decision on whether to include a stock in the benchmark index, looking at a company’s size, financial strength, the number of public shares available to be traded and how many shares change hands in an average day. The committee also looks at what business the company is in out of a desire to not skew the index too heavily toward one sector or another. Technology accounts for 34.6% of the index today, and communication services, which houses Alphabet and Meta Platforms , another 10.7%. Currently, companies must have at least a $23 billion market capitalization to even be eligible to join the S & P 500 when changes are made, according to Charles Schwab. Index changes are made either during regular quarterly adjustments or as a result of a corporate action, such as a merger or acquisition. Today, S & P Global says the largest stock in the S & P 500 has a market cap of $4.3 trillion while the smallest is worth just $5.5 billion. Goldman Sachs last year estimated that passive, stock index funds own an average of 26% of every stock in the S & P 500. When a stock is added or removed from the index, passive funds are forced to buy or sell shares of that company to keep its representation in the index intact. S & P Dow Jones Indices estimated in 2024 that $16 trillion in total assets under management was indexed or benchmarked to the S & P 500, with passively managed indexed assets comprising $9 trillion.
