In a move that is sure to spawn investor confusion and market turmoil, the old lineup of S&P 500 industry sectors is no more. A major objective was to break up the information technology sector, which had ballooned in value to represent roughly 26% of the capitalization-weighted S&P 500 Index (SPX). The old telecom sector has been renamed communications services, bolstered by 23 stocks with a combined market cap of nearly $3 trillion, per reports by CNBC and The Wall Street Journal. Of these 23 stocks, six formerly were in information technology, and 16 were in consumer discretionary, according to an earlier CNBC report. Most notable among the new communications services stocks are FAANG members Facebook Inc. (FB), Netflix Inc. (NFLX) and Google parent Alphabet Inc. (GOOGL). (For more, see also: 3 Tech Stocks Nearing a Breakout.)
The shakeup is bound to have major consequences for investors in passive ETFs, who should be re-evaluating their holdings right now. “It is very important for investors to understand how the reclassification will affect their portfolios, since the ETFs that they currently hold may no longer suit their investment objectives,” advises Neena Mishra, director of ETF research at Zacks Investment Research, as quoted by CNBC.
