Wall Street will soon find out, as investors strap in for what could be a frenetic ride in equities thanks to electric-vehicle maker Tesla.
To put that addition into perspective, every $11 move in the Palo Alto, Calif.-based company would commensurately swing the entire S&P 500 by nearly a point.Last quarter’s S&P 500 rebalancing saw a sizable $32.4 billion change hands, above the average of about $27 billion and under the record $50.8 rebalancing of the third-quarter of 2018.
“While there are more than a dozen companies added to the S&P 500 index each year they are typically among the smallest companies representing less than 0.1% of the index. Tesla is considerably larger and requires more planning on the part of the asset managers who want to refrain from incurring too much index tracking risk,” the CFRA researcher said.
“It’s SPYs largest ever, rebalancing,” the State Street official said, noting that the fund manager feels it’s well equipped to handle. Complicating matters is the fact that Tesla is also an unusually volatile stock for a S&P 500 member. Its shares have run-up 48% since the S&P Dow Jones Indices announced it was being added to the broad-market index in mid-November. Tesla’s shares have risen a whopping 622% so far this year and are considered one of the most volatile stocks among major companies.
Don’t.
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