Get ready for some potential market action as Apple Inc. (AAPL) is expected to benefit from the upcoming S&P 500 rebalancing taking place on Friday. This quarterly event, which happens on the third Friday of March, June, September, and December, involves adjusting the weights of stocks within the index.
Apple is currently the second-largest holding in the SPDR S&P 500 ETF Trust (SPY), with 6.7% of assets, trailing just behind Microsoft Corporation (MSFT) at 6.8%. However, thanks to its massive market capitalization of $3.48 trillion, surpassing Microsoft’s $3.26 trillion, Apple is poised to take the lead in the holdings.
This rebalancing aligns with new index-capping rules that will change how the allocation for the largest companies is determined. Bloomberg reports that the reshuffling of $250 billion in shares in index-tracking funds is predicted to favor the technology sector, particularly companies like Apple. Piper Sandler estimates a net buying of $40 billion for the technology sector, with Apple likely to receive a significant portion of that.
The tech giant’s dominant market capitalization, the new index rules, and recent sales by Warren Buffett and Berkshire Hathaway have led to an increase in available Apple shares, boosting its prospects. This change in float, which refers to the number of shares available for public trading, plays a role in how indexes allocate holdings, particularly in cases where float-adjusted market capitalizations are used.
This rebalancing comes at a critical time for Apple, as the company prepares to launch the iPhone 16. Investors and analysts are closely watching how the new features, including Apple Intelligence, will resonate with consumers and whether they are enough to convince them to upgrade from their current devices. The iPhone 16 launch, combined with the market reshuffling, could contribute to market volatility.
It’s important to note that Apple and Microsoft have been locked in a close competition as the world’s most valuable companies for several years. Both companies were briefly surpassed by Nvidia earlier this year. The upcoming rebalancing is likely to reshape many index funds and impact their performance going forward.
Apple’s stock is currently trading at $229.02, within a 52-week trading range of $164.08 to $237.23. The stock has seen a 23% year-to-date increase in 2024.
