Regardless of whether you’re an everyday investor or experienced advisor, the rebalancing of the S&P 500 is always worth keeping a close eye on.
Later today, after the market closes, we’ll learn what companies will be added and removed to the S&P 500 later this month. Nothing’s set in stone yet per se, but speculation is mounting that three to four companies in particular may get added to the S&P 500.
The Potential Candidates
First up on the list of potential additions is CRH. CRH is a well-known manufacturer and distributor for building materials, construction parts, and more.
Vertiv is another company that is on the potential short list for the S&P 500. The company provides services and infrastructure support for data centers, communication networks, and other digital and industrial needs.
Another speculated addition to the S&P is Anylam Pharmaceuticals. This biopharmaceutical company develops RNA interference therapeutics to treat and prevent a variety of different diseases.
The last company that some are keeping an eye on is Ares Management. This investment manager maintains a global presence, providing its clients with investment expertise across a wide variety of different sectors.
How the Rebalancing Affects Large-Cap ETFs
Regardless of which companies get added to the S&P 500, it’s crucial for advisors and investors to understand how this affects their current large-cap exposure. After all, some large-cap funds may be more affected by this change than others, be it positively or negatively.
For instance, a fund like the Invesco S&P 500 Equal Weight ETF (RSP) is likely to see a more drastic shift from any changes in the S&P 500. This is due to the fund’s focus on equally weighted exposure to each of the companies within the index.
Meanwhile, ETFs like the SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), and Vanguard S&P 500 ETF (VOO) may see less of a drastic change. Sure, these funds will likely see movement due to the news. However, the extent may not be as extreme as RSP will. This is due to how these ETFs tilt towards particular stocks within the index, particular mega-cap tech names.
Regardless, the S&P 500 rebalancing will likely cause one’s large-cap exposure to shift in some manner, be it extreme or not. Advisors and investors should take a close look at their portfolios and make sure they’re ready to roll.
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