On December 17, 2024, the S&P 500 and Nasdaq-100 indexes undergo quarterly rebalancing, an event with major financial implications due to trillions in assets linked to index ETFs. Palantir Technologies is confirmed for inclusion in the Nasdaq-100. For the S&P 500, Apollo Global Management and Workday are being added, while Qorvo and Amentum are being removed. Notably, despite meeting market capitalization and profitability standards, Coinbase Global was excluded from the S&P 500 index.
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Major quarterly rebalancing of the S&P 500 and Nasdaq-100 indexes on December 17, 2024, is set to impact trillions in assets due to the massive growth of index-based Exchange Traded Funds (ETFs).
Impact of Index Reconstitution
Historically, changes to major indexes had minimal effect on trading volume. However, the proliferation of index-tracking ETFs has fundamentally changed this dynamic. The sheer scale of assets tied to these indexes means that which stocks are added or removed carries significant weight.
S&P 500: Approximately $16 trillion is currently indexed to the S&P 500.
Nasdaq-100: The largest ETF (QQQ) holds $321 billion in assets, supplemented by mutual funds like Invesco Nasdaq-100 Index (IVNQX) with about $100 billion, totaling well over $400 billion in assets.
Key Index Changes Announced
The quarterly adjustments are based primarily on companies' adjusted market capitalization. Specific changes for the two indexes include:
Nasdaq-100 Inclusion
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Palantir Technologies: The company is confirmed to be added to the Nasdaq-100 index at the close of trading on Friday.
S&P 500 Updates
Additions: Apollo Global Management and Workday are slated to be added to the index.
Deletions: Qorvo and Amentum are scheduled for removal.
S&P 500 Eligibility Criteria
While many assume the S&P 500 tracks the 500 largest U.S. companies, the inclusion process is more nuanced. Key requirements include:
A minimum market capitalization of $18 billion.
Constituent selection is at the discretion of the Index Committee, based on established eligibility criteria, rather than solely on market cap size.
Notable Omission: Coinbase Global
Despite meeting several criteria, Coinbase Global was not included in the S&P 500 changes. Although the company possesses a market capitalization comparable to Workday ($68 billion) and has maintained profitability over the last four quarters, its stock is noted as being significantly more volatile compared to the selected additions.
