How rebalancing will affect the 7 magnificents!

The S&P 500 and Nasdaq 100 are both major stock market indices that are rebalanced on a regular basis. The rebalancing process involves adjusting the weights of the individual stocks in the index to reflect their current market capitalization. This helps to ensure that the index remains representative of the overall market and that it is not too heavily weighted towards any particular sector or company.

The S&P 500 is rebalanced quarterly, while the Nasdaq 100 is rebalanced monthly. The rebalancing process for both indices is typically announced a few weeks in advance, so that investors have time to adjust their portfolios accordingly.

In July 2023, Nasdaq announced that it would be conducting a special rebalance of the Nasdaq 100. This special rebalance was triggered by the fact that the top seven stocks in the index (Apple, Microsoft, Amazon, Alphabet, Tesla, Nvidia, and Meta) had become too heavily weighted. As a result of the special rebalance, the weights of these seven stocks were reduced, while the weights of other stocks in the index were increased.

The special rebalance of the Nasdaq 100 is expected to have a modest impact on the index's performance. However, it is important to note that any rebalancing of an index can lead to short-term volatility in the prices of the individual stocks in the index.