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The S & P 500 ‘s quarterly shakeup has become a favorite guessing game for traders. New Wall Street research suggests the index’s upcoming rebalance could give spots to one hot AI company and some other well-loved stocks. The S & P Dow Jones Indices announced on Monday that Interactive Brokers will replace Walgreens Boots Alliance , which is set to go private, in the S & P 500 on Thursday. Shares of the brokerage, which was the largest financial stock in S & P 400 Midcap index, jumped on Tuesday following the announcement before giving up the bulk of its morning advance. The stock has gained 42% year to date. However, shares of companies included in the S & P 500 rebalance, which is set to occur on Sept. 5, typically spike afterwards. New stock additions to the index have historically outperformed by an average of 6% to 9% the day after the announcement, according to Stephens. For example, shares of Block jumped about 7% on July 21 after S & P Global said the fintech company will migrate to the S & P 500, replacing Hess. IBKR 1Y mountain Interactive Brokers stock performance over the past year. Looking ahead, Stephens analyst Melissa Roberts expects the S & P 500’s third quarterly rebalance this year to be more significant than the last. The third quarter has historically given the greatest 5-year average turnover for the S & P 500 indexes, with an average turnover of 1.2%, she said in a recent note to clients. “There is the possibility that the index committee makes no discretionary membership changes as they did last quarter,” Roberts wrote in a Tuesday note. “However, the 3Q rebalance is typically the largest rebalance of the year because it includes annual constituent float factor changes. So, S & P historically took advantage of the liquidity opportunity to make more discretionary changes than in other quarters.” S & P Global made no changes to the S & P 500 in its June rebalance. That was the first time there was no component change to the index since March 22, a decision that weighed on shares of companies investors were speculating would be added. Robinhood , for example, rallied for six consecutive sessions between May 30 and June 6 before declining in the trading session after the rebalance. This time around, Stephens sees Strategy , the bitcoin treasury company formerly known as MicroStrategy; CRH , a building products manufacturer; and Astera Labs as three stocks that are newly eligible to move to the S & P 500. Strategy is notably a high beta play on the price of bitcoin, making it a controversial stock as it often moves alongside the price of the cryptocurrency. Shares of the company are up 19% this year. “MSTR and CRH clear the financial viability criteria with positive GAAP net income. Interestingly, two recent adds to the 400 ([ Talen Energy ]) and 600 ([ Twilio ]) recently met this criteria and were added,” Roberts said. Speculation about Strategy’s addition to the index comes after the inclusion of crypto firm Coinbase and Block to the S & P 500 earlier this year, which were significant milestones and reflected the market’s increasing appetite for crypto. Astera Labs, which sells data center connectivity chips to artificial intelligence-related companies such as Nvidia and AMD , has soared more than 35% since its public debut on the Nasdaq in March.
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