New weights for the largest stocks in the Nasdaq 100 take effect Monday after the index’s second “special rebalancing” in 25 years.
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These new levels were shared early on with Goldman Sachs Group US equity analyst David Kostin. Kostin and his team published a report of the changes that was shared with Goldman clients and the press last week.
Here are four of the most important transitions highlighted in Kostin’s note:
The seven stocks with the heaviest weights in the Nasdaq 100 see their collective weighting drop to 44% from 56%.
At the sector level, IT will continue to represent almost half of the indicator, but the sector’s weight will drop to 49% from 51%.
Apple Inc. AAPL,
and Microsoft Corp. MSFT,
They will remain the largest components of the index, but the index weights will decrease by about four percentage points – to 12% and 10%, respectively.
Broadcom is seeing the biggest increase in weight, and will see its weight increase by 64 basis points, to 3%.
The Goldman analyst has summarized how the new weights will affect the 25 largest components of the index in the chart below.
According to NASDAQ representatives, the NASDAQ 100 is the most popular stock index. So far this year, it has outperformed the Nasdaq Composite, which is a broader index that includes every publicly traded company. The Nasdaq 100 rose 41.2% to 34.4%, according to FactSet data.
EPFR data shows $261 billion in mutual fund and exchange-traded fund assets measured for the Nasdaq 100, including the Invesco QQQ Trust Series QQQ,
Known for its QQQ bar. More than $250 billion of that money is being invested in negative benchmarking strategies.
Nasdaq decided to implement its own rebalancing earlier this month to try to avoid concentration risks after its seven largest constituents rose earlier this year. In accordance with its official index management methodology, Nasdaq aims to keep the combined weight of its largest constituents at 40%.
Costin said he doesn’t expect these changes to have a significant impact on markets, arguing that previous private rebalancing didn’t move the index much either.
The Nasdaq 100 and Nasdaq Composite fell slightly on Monday as big tech names continued to lag behind the S&P 500 and suddenly the Dow Jones Industrial Average, DJIA,
Just like they did last week.
Nasdaq 100 tracking QQQ QQQ,
It was down 0.2% at $374 a share Monday morning, while the Nasdaq Composite Index,
It fell 0.2% at 14,013.
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