S&P 500 Index Rebalance: Steady Preference for Technology

Every quarter, S&P-Dow Jones rebalances its flagship market-capitalization index series, including the S&P 500 Index. Changes to the index related to the rebalance may appear small but they drive significant trade volumes in the market from the announcement date (Sept. 6, 2024, by S&P-Dow Jones) and leading up to the effective date of the changes, which is the market close on Sept. 20, 2024. According to S&P estimates, about $16 trillion in assets are benchmarked to the flagship S&P 500, with a large portion of that in passively managed assets.1 All investors should be aware of these changes but they are particularly important for index managers, who are tasked with tracking indexes with a high level of precision.

Rebalance periods at Northern Trust, one of the world’s leading managers of index assets,2 demand a significant amount of collaboration across our investment team. For all our index portfolios benchmarked to the S&P indexes, we must carefully manage the rebalances to ensure we achieve our primary objective of matching the risk and return characteristics of the benchmark.

Key Changes: Technology Additions and Apple's Float Increase

This quarter’s S&P 500 rebalance included three additions, two of which are in the information technology sector (see Exhibit 1). Computer hardware maker Dell, and Palantir Technologies (a software firm), entered the index with a weighting of 0.07% and 0.15% respectively. The third addition was property and casualty insurance company, Erie Indemnity, with a weighting of 0.03%. Two companies dropped down from the index into the S&P Midcap 400 – American Airlines and biotechnology company, Bio-Rad Laboratories. Etsy was also removed from the leading index and demoted to the S&P Small Cap 600.

S&P used this quarter’s rebalance to incorporate its annual float changes. The S&P 500 index is a float-adjusted index, meaning the share count used to calculate the index reflects only those shares available to investors rather than a company’s total outstanding shares. Float adjustments exclude shares that are held by other publicly-traded companies, governments, or other types of strategic shareholders.

In this review, the S&P stock universe is assessed and updated to reflect the most current ownership data. As a result, one of the largest share changes was an increase in the float of Apple, stemming from the disclosure of stock sales from its shareholder Berkshire Hathaway this year. This increase is notable as it will result in a weight increase of 0.33%, taking its weight in the index to over 7% and generating an estimated buy of $25 billion in net traded value across the market.3

exhibit 1