In addition to the next anticipated fed rate hike, there’s a lesser-known factor set to take effect later this year that may impact markets, and may even cause a flash crash. The change that’s coming has to do with both the S&P and MSCI overhauling their global industry classification system (GICS), and Jim Puplava offered his insight as to how this might shake out.

A New Sector Emerges

This system, known as GICS, determines which stocks fall into what sectors, industry groups, and sub industries. The changes that are coming are important, Puplava stated, because the system determines what stocks go into various sector funds or ETFs.

The restructuring of GICS is going to generate a lot of asset reshuffling, and the biggest change is the introduction of a new sector called the communications sector, which is going to replace telecommunications.

The new sector will make telecommunications as a sector extinct, and is going to be comprised of cherry-picked stocks from the tech, consumer discretionary, and telecom sectors, respectively.

“The new sector will be huge, and when I say huge, it will become the fourth-largest sector for investing,” Puplava said. “No. 1 is technology. No. 2 is healthcare. No. 3 is financials. The new communication sector will become No. 4.”

Timeline for Restructuring

The S&P plans to reconstitute its indexes after the market closes on September 28, Puplava noted, and MSCI is going to change its indexes effective December 2.

Keep a close watch on how markets perform on October 1 after the S&P change to get an idea of how these changes will impact investing.

Next, be sure to mark your calendar to note how markets handle MSCI’s index changes on December 4.

“This is going to be a big thing,” Puplava said. “At this point, we simply do not know what this is going to look like.”

Potential Impacts

Puplava has often noted that there is a bubble in passive index investing, and this classification change is likely to lead to further concentration of a few big names in a few sectors.