October 12, 2023
- The S&P 500 is a list of the 500 largest publicly traded companies in the United States. Companies are added and removed from the list based on their market capitalization, which is the total value of all of their outstanding shares.
- In the USA, many regional banks face possible removal from the S&P 500. Stock sell-off affects regional banks, such as Zions and Comerica, due to their market capitalization downfall. This could lead to a decline in their stock prices.
In the USA, many regional banks face possible removal from the S&P 500. This has mainly happened due to the stock sell-off that has hit many regional banks in the country. Due to this phenomenon, banks like Zions and Comerica are at risk of being removed from the list.
Some of these banks were in 4th and 6th place on the list since they had a market capitalization of around $5 billion. Banks like Lincoln National lost their spot in the S&P 500 last month and were placed in a small-cap index. Blackstone, the world’s largest alternative asset manager, took Lincoln National’s spot as well.
This crisis has caused a lot of changes in the S&P 500 list, which is the most popular broad measure of large American companies in the investing world. Analysts predict that more modifications are likely, particularly if the industry experiences a prolonged downturn.
“It’s absolutely a risk,” Chris Marinac, research director at Janney Montgomery Scott, said in an interview. “If the market were to further change the valuation of these companies, especially if we have higher rates, I wouldn’t rule it out.” “Perhaps more demotions of low-market cap financials are to come,” Wells Fargo analyst Finian O’Shea said in a Sept. 5 research note.
Stocks Under the Radar
Companies under $6 billion in value are more likely to get kicked out of the S&P 500. In August, seven of these companies faced this risk, and two of them, Lincoln National and Newell Brands, were removed a month later. When new companies enter the S&P 500, they usually get a stock price bump due to the index’s popularity among mutual funds and ETFs. But when companies leave, their stock can drop because fewer fund managers need their shares.
The removal of regional banks from the S&P 500 would be a major setback for the banking industry. It would also be a sign of the changing landscape of the financial services sector. Overall, the possible removal of regional banks from the S&P 500 is a significant development that is worth watching closely.