From Morningstar: 2024-09-20 10:19:00

S&P is changing how it avoids regulatory concentration limits for its indexes, impacting the $68 billion Technology Select Sector SPDR ETF. The top three holdings – Microsoft, Nvidia, and Apple – make up nearly half of the ETF. Regulations prevent too much concentration in index funds, requiring adjustments to weights.

The Technology Select Sector SPDR ETF heavily relies on Microsoft, Nvidia, and Apple for returns, triggering index weighting caps to prevent overconcentration. S&P is changing its rules to maintain diversity, with no single issuer exceeding 25% of assets.

In June, Apple replaced Nvidia as the ETF’s third-largest stock, highlighting the need for rebalancing due to market cap changes. The upcoming change in index regulations will affect how weights are adjusted, impacting the Technology Select Sector Index and SPDR ETFs.

The Technology Select Sector SPDR ETF will have its weights reset on September 20, with Apple’s share increasing significantly. Expect high trading volumes on that day, especially for Apple and Microsoft stocks. Index rebalances can lead to increased volatility, so short-term traders should be cautious.

On Friday, billions of dollars will change hands as S&P implements new rules to prevent overconcentration in its indexes. The Technology Select Sector SPDR ETF will see significant changes in weights, particularly with Apple’s share tripling. Investors should be prepared for heightened trading activity and potential market volatility.



Read more at Morningstar: The S&P is Getting a September Shakeup: What’s…