The S&P 500 is about to undergo a major structural change that may alter which technology stocks you own.
Facebook and Google’s parent Alphabet will move out of the index’s technology sector and to a newly formed communication services sector in about six weeks. The goal is to make tech appear less dominant in the S&P 500.
DataTrek Research co-founder Nicholas Colas calls it the highest profile change to S&P’s sector weightings in at least three decades and suggests there could be dangers.
“That will really reshape how people think about the weightings of tech in the S&P,” he said Monday on CNBC’s “Trading Nation.” “You’re going to see a major downgrading of tech weightings in the S&P 500 when this change happens, and that’s purely an illusion. That’s just reclassifying the names and the sectors.”
The reshuffling begins on Sept. 21. But the ETF industry is already taking steps to reflect the change.
It launched the Communication Services Select Sector SPDR Fund, also known as the XLC, on June 19. The new ETF includes Facebook and Alphabet, which have been components of the Technology Select SPDR Fund or XLK. That will leave Apple, Microsoft, Visaand Intel as the top holdings in the technology sector ETF.