Tech stock dominance in the S&P 500 is set to shrink next year

Yahoo Finance Live's Julie Hyman and Brian Sozzi discuss the dominance of tech stocks in the S&P 500, which is expected to shrink next year due to sector reclassification.

Video Transcript

- Dominance of tech stocks inside the S&P 500 is on track to shrink next year. Julie, this is an interesting one because it looks like Visa, PayPal, and Mastercard could be impacted here. - Yeah. So to be clear, this is important because billions of dollars in ETFs and index funds tracks the sector classifications within the S&P 500. And that's determined by S&P Dow Jones Indices and by MSCI. So when they do a reclassification of what goes into which sector, that's why we care. That's why it is quite important here. And so what they're telling us, those two organizations, is that they're going to do some type of reclassification that will put some of the companies that previously had been in the tech category-- companies like Visa and PayPal and Mastercard-- instead to the financial sector from the tech sector. Now, as we know, the tech sector is the biggest weighting in the S&P 500. It accounts for about 28%. This then will likely reduce that weighting as we see this reshuffling. This reshuffling, by the way, is not happening tomorrow. It's not even happening this year. It's happening in 2023. But you tend to see a lot of rejiggering and a lot of attention paid to these kinds of changes. So that's why it's a big deal. That's why they're sort of getting out ahead of it and talking about the changes that they're going to make. By the way, though, it's not just in technology that they're going to be making changes. This is interesting, Sozz. This is a good one for you. They are consolidating general merchandise stores and department stores. In other words, Walmart and Macy's are not going to be in two subsectors anymore. They'll be in the same one. And it looks like they are also moving away from even calling things stores. They're going to call it broadline retail, which is interesting and sort of a reflection of the omnichannel-- to use that retail buzzword-- environment that we're in right now. In addition to that, some of the retailers are going to go into consumer staples as well. So interesting the sort of rejiggering-- - I don't like it. - --that we're going to be seeing. - Macy's shouldn't be looped in with Walmart. Macy's doesn't sell any steak. I can go into Walmart and pick up a $2 steak. Macy's doesn't sell that stuff. Why group them together? - That's just what they're hearing from their constituents. Macy's does sell some food, by the way. They might not sell steak. But don't they sell specialty foods in some of the stores still? - I think we have to table this one, professor Hyman. We got to keep it moving here. We got to take a field trip. - Yeah. We'll take a field trip to the empty Macy's store by my house.