Title: Nasdaq 100 Undergoes Special Rebalancing: Tech Stocks’ Weighting Reduced
In a rare occurrence, the Nasdaq 100 is currently undergoing its second “special rebalancing” in 25 years, causing major shifts in the index’s weightings. These changes, set to take effect on Monday, will redistribute the collective weight of the largest stocks, altering the landscape of this popular exchange.
A comprehensive report detailing the alterations has been released by Goldman Sachs Group Chief U.S. Equity Analyst, David Kostin, and his team. The report, shared with Goldman clients and the press, sheds light on the significant transformations taking place within the index.
One of the most important shifts includes a reduction in the collective weight of the seven stocks with the heaviest weightings in the Nasdaq 100. Previously accounting for 56% of the index, these stocks will now hold only 44% of the total weight. Furthermore, while the information technology sector will still comprise roughly half of the index, its weight will decline slightly from 51% to 49%.
Despite the changes, Apple Inc. and Microsoft Corp. will retain their positions as the index’s largest constituents. However, their index weights will be reduced by approximately four percentage points. On the other hand, Broadcom’s index weight will experience the most significant increase, with its weighting rising by 64 basis points to 3%.
The Nasdaq 100 is currently the most favored index among investors, having outperformed the Nasdaq Composite this year. Approximately $261 billion worth of mutual fund and exchange-traded fund assets are benchmarked to the Nasdaq 100, including the Invesco QQQ Trust Series.
The special rebalancing was implemented by Nasdaq to address concentration risk, as the index’s largest components surged earlier in the year. According to Goldman Sachs analyst David Kostin, these changes will have minimal impact on the markets.
Remarkably, both the Nasdaq 100 and Nasdaq Composite experienced slight declines on Monday, as prominent tech names continued to lag behind the S&P 500 and Dow Jones Industrial Average.
As the Nasdaq 100 undergoes this significant rebalancing, the reshuffling of weightings is expected to create a more balanced and diversified index, ensuring a more stable and sustainable growth trajectory.
(Note: Word Count – 330)
