Growth, value stocks set for reshuffle as S&P adopts new rules

Growth and value shares are set for an overhaul after S&P Dow Jones Indices adopted new rules on how to sort equities into the two investment styles.The index provider will add intangible assets, forward earnings and free cash flow to the list of factors to define whether a company is cheap relative to its share price, according to a statement Friday. At the same time, 12-month price momentum will be dropped as a criteria to rank a company’s growth potential.US MarketsPowered ByAs on 24 Oct 2026, 01:30 AM ISTS&P 500 Top GainersCrown Castle85.97(9.06%)CrowdStrike Holdings257.57(8.25%)Palo Alto Networks380.55(7.22%)SLB53.06(7.08%)Gainers»S&P 500 Top LosersLKQ17.42(-22.47%)Coterra Energy32.56(-8.62%)Globe Life154.79(-8.09%)AT&T20.93(-7.96%)Losers»The new rules came after a recent consultation and will take effect at the annual reconstitution before the market open on Dec. 21.BloombergThe changes are poised to force index-tracking funds to adjust holdings to match the new constituents.

Bloomberg Intelligence analyst James Seyffart estimated at least $375 billion of passive funds are tied to the affected gauges.Read more: iPhone Duo internal display break: Are iPhone Duo displays too fragile? Users report alarming cracks near hingeLive EventsS&P’s decision follows a long debate over whether conventional value measures still work. Researchers and money managers have argued that part of value’s long slump reflected flaws in the metrics, especially price-to-book.

The adjustment is meant to account for spending on research and other internally developed assets that accounting rules usually treat as expenses rather than balance-sheet assets. Critics say this makes intellectual-property-heavy companies look expensive and can keep them out of value indexes.Read more: US consumer sentiment near record low ahead of midterm electionsS&P isn’t the only index provider that has been mulling changes.

FTSE Russell is reconsidering the 50/50 split between growth companies and value stocks in its benchmarks due to the dominance of technology giants in the market. That consultation ends Dec. 11.(You can now subscribe to our ETMarkets WhatsApp channel)