On Dec. 5, S&P Dow Jones Indices announced the companies that would be joining and leaving the S&P 500 Index (SPY), S&P MidCap 400 Index (MDY), and S&P SmallCap 600 Index (VIOO) effective Dec. 22, 2025. Now in the first full trading week of 2026, the major S&P indexes have all been rebalanced and welcomed new members, including Carvana (CVNA), Comfort Systems USA (FIX), and CRH (CRH), among others.
Why Does the S&P 500 Rebalance?
It's crucial for investors to understand why the S&P 500 or any index rebalances regularly, as this mechanism is what makes index investing so powerful. The index is market cap-weighted but also incorporates stock price performance and other criteria, meaning companies can graduate into higher indexes or be demoted to lower ones based on their market performance.
Take Carvana as a prime example. The online used-car retailer traded as a penny stock and faced bankruptcy concerns just two years ago, but after cleaning up its financials and experiencing explosive growth, it's now entering the S&P 500.
This kind of dynamic rebalancing is important for several reasons, but primarily because investors essentially have an actively managed portfolio when they invest in index funds or index ETFs.
As companies fail to meet performance criteria, index managers like S&P remove underperformers and replace them with up-and-coming companies that are performing better, which gives investors consistent portfolio optimization driven by market forces rather than subjective hedge-fund manager picks.
Companies must meet specific requirements to join the S&P 500: sufficient market capitalization, adequate trading volume (at least 250,000 shares traded in the last six months), a majority of shares in public hands, at least one year past their IPO, and consecutive positive quarters of earnings, including the most recent quarter.
Conversely, companies are removed from the index when these factors break down consistently. There's no single hard and fast rule, but sustained underperformance against these criteria will result in removal.
A famous example is United States Steel (X), which was one of the biggest companies in America throughout the 20th century and had been in the S&P 500 since the index was first tracked. At one point, it was the biggest company in the world, but when it fell below a $4 billion market cap in 2013, the index removed it and replaced it with Martin Marietta Materials (MLM), a construction materials producer.
This demonstrates how the index evolves with the economy rather than clinging to legacy names.
S&P 500 Changes Effective Dec. 22, 2025
Additions:
Deletions:
- LKQ (LKQ) - Consumer Discretionary
- Solstice Advanced Materials (SOLS) - Materials
- Mohawk Industries (MHK) - Consumer Discretionary
S&P MidCap 400 Changes Effective Dec. 22
Additions:
- UL Solutions (ULS) - Industrials
- Pinterest (PINS) - Communication Services
- Booz Allen Hamilton Holding (BAH) - Industrials
- SPX Technologies (SPXC) - Industrials
- Dycom Industries (DY) - Industrials
- Borgwarner (BWA) - Consumer Discretionary
- Hecla Mining Co (HL) - Materials
Deletions:
- Comfort Systems USA (FIX) - Industrials (promoted to S&P 500)
- Under Armour A (UAA) - Consumer Discretionary
- Under Armour C (UA) - Consumer Discretionary
- Power Integrations (POWI) - Information Technology
- Perrigo Company (PRGO) - Health Care
- Iridium Communications (IRDM) - Communication Services
- Marriott Vacations Worldwide (VAC) - Consumer Discretionary
- Insperity (NSP) - Industrials
S&P SmallCap 600 Changes Effective Dec. 22
Additions:
- Primoris Services (PRIM) - Industrials
- Casella Waste Systems (CWST) - Industrials
- Indivior (INDV) - Health Care
- Hawaiian Electric Industries (HE) - Utilities
- LKQ (LKQ) - Consumer Discretionary (demoted from S&P 500)
- Solstice Advanced Materials (SOLS) - Materials (demoted from S&P 500)
- Mohawk Industries (MHK) - Consumer Discretionary (demoted from S&P 500)
- Under Armour A (UAA) - Consumer Discretionary (demoted from MidCap 400)
- Under Armour C (UA) - Consumer Discretionary (demoted from MidCap 400)
- Power Integrations (POWI) - Information Technology (demoted from MidCap 400)
- Perrigo Company (PRGO) - Health Care (demoted from MidCap 400)
- Iridium Communications (IRDM) - Communication Services (demoted from MidCap 400)
- Marriott Vacations Worldwide (VAC) - Consumer Discretionary (demoted from MidCap 400)
- Insperity (NSP) - Industrials (demoted from MidCap 400)
Deletions:
- SPX Technologies (SPXC) - Industrials (promoted to MidCap 400)
- Dycom Industries (DY) - Industrials (promoted to MidCap 400)
- Borgwarner (BWA) - Consumer Discretionary (promoted to MidCap 400)
- Hecla Mining Co (HL) - Materials (promoted to MidCap 400)
- Ready Capital (RC) - Financials
- SITE Centers (SITC) - Real Estate
- Thryv Holdings (THRY) - Communication Services
- Helen of Troy (HELE) - Consumer Discretionary
- AdvanSix (ASIX) - Materials
- Sturm Ruger & Co (RGR) - Consumer Discretionary
- MGP Ingredients (MGPI) - Consumer Staples
- Ceva (CEVA) - Information Technology
- Shoe Carnival (SCVL) - Consumer Discretionary
September 2025 Rebalance Recap
The S&P 500 was also rebalanced on September 22, 2025, when several high-profile companies entered and exited the index. AppLovin (APP), Robinhood Markets (HOOD), and Emcor Group (EME) all joined the index, while Caesars Entertainment (CZR) , Enphase Energy (ENPH), and MarketAxess Holdings (MKTX) were removed from the S&P 500. Additionally, Uber Technologies (UBER) replaced Charter Communications (CHAR) in the S&P 100, though Charter remained in the S&P 500.
The S&P 500's Ongoing Evolution
The S&P 500 is an ever-evolving index that tracks performance and grows alongside the American economy.
Although it's not representative of every large company in the United States, it has delivered consistent returns and steady growth over many decades, earning praise from executives like Warren Buffett, Elon Musk, Jeff Bezos, and other industry leaders worldwide.
It's a powerful investment vehicle that offers a dual benefit: tremendously increasing investor net worth over time while simultaneously investing in the future of the American economy.
The regular rebalancing process ensures that the index remains relevant, dynamic, and optimized for performance rather than becoming a museum of legacy companies that have lost their competitive edge.
On the date of publication, Justin Estes did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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