The S&P 500's Incredibly Shrinking Market Cap

by: Bespoke Investment Group

In an earlier post on the declines that individual stocks in the S&P 500 have seen over the course of the index's six-day losing streak, we noted that because of their market caps, if they were being considered for inclusion into the index today, many of the losers on the list wouldn't even qualify. Expanding on that theme, we wondered how many stocks in the S&P 500 don't even meet the current market cap threshold ($3 bln+) for inclusion into the index. Readers looking for the complete eligibility requirements for inclusion into the S&P 500 can get them by clicking the following link: Eligibility requirements for the S&P 500.

In the table below, we summarize the number of stocks in each sector that currently do not meet the $3 bln market cap threshold to be eligible for inclusion in the S&P 500. In the Consumer Discretionary sector, over 40% of the stocks currently have market caps of less than $3 bln. For the index as a whole, nearly 27% of the stocks that are currently in the index would not be eligible for inclusion if they were being considered today. Fortunately for them, S&P doesn't automatically kick companies out of the index when they fall below the market cap threshold. And since there aren't many companies outside of the index that could replace the ones that no longer would qualify, the only thing S&P can really do is lower the requirements.