The table below lists the historical sector weightings of the S&P 500 index. Currently, the largest GICS sector of the index is Information Technology, followed by Financials. Telecoms, Materials, Utilities & Real Estate all make up less than 3% of the index. Check the historical weights of the individual index components from here. Note: Real Estate was moved out from under Financials and promoted to its own sector after the market closed on August 31, 2016.
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S&P 500 - Sector Weightings (%)
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Changes in the Sector Weights During the Past 10 Years
Since 12/31/2006, the weighting of the financial sector has decreased considerably. The global financial crisis of 2008 dropped the weight of the sector temporarily to just 11%. Financial services recovered quickly after the crisis but the sector is still much smaller compared to other sectors than it was before the crisis. Information technology sector has risen with the help of Apple, Microsoft and Alphabet from 15% to over 20%. Currently, the weight of Apple is 3.7% of the whole index. Since 2009, the weight of energy sector has halved and its currently just a bit more than 6%. The sharp decrease in oil prices has caused big worries for energy companies. In the beginning of 1980, energy was clearly the largest sector, making up 25% of the S&P 500. Also material companies are now just a fraction of what they used to be 35 years ago.
S&P 500 Sector History
When S&P 500 index was created in March 1957, the index consisted of 425 industrials, 60 utilities and 15 railroad companies. In 1976, the structure was changed to 400 industrial, 40 utility, 40 financial and 20 transportation corporations. So quite surprisingly, there were no financial service corporations part of S&P 500 before the year 1976. In 1988, Standard & Poor’s finally removed the 400-40-40-20 system and since then the index committee was more free to select index constituents. But sector balance is still an important factor when selecting the companies to the index. In 2005, S&P Dow Jones changed their methodology for all US indexes to float adjusted market cap weighted index. This means that instead of full market cap, the weight of a company is adjusted based on a public float factor (IWF). This had big effect on some large companies like Wal-Mart with a lot of shares not tradable in public and the change also affected the sector weightings.
The Performance of Different Sectors
A lot of research has been made about the performance and returns of different sectors. During 2014 the stock market was booming but the growth was halted in 2015. Between January and October 2015, majority of the sectors have been generating negative returns. From the sectors, energy companies have had the worst year, generating negative return of 13.7%. Materials sector is also down 9.2% and utility companies have lost 7.3% of their value. The only sector with any gains is consumer discretionary that is up 7.7%.
But if the performance is examined for the past five years, all the sectors have been generating positive returns. Both healthcare and consumer disc. sectors have gained over 120%. The worst sector is again energy companies whose value has increased only 18% during the past five years.
The Difference Between Consumer Staples & Consumer Discretionary Sectors
Consumer discretionary companies are selling nonessential goods and services. The businesses include car manufacturers, high-end clothing, media, hotels, and luxury goods. Consumer staples corporations sell products that people are unable (e.g. food, beverages, household items) and unwilling (e.g. tobacco) to stop consuming. Consumer staples businesses are considered non-cyclical and the demand for these products is expected to be much more staple as the consumer discretionary goods.
Global Industry Classification Standard (GICS) System
The sectors in S&P 500 are based on the Global Industry Classification Standard, an industry taxonomy developed by Standard & Poor’s together with MSCI. In addition to the ten main sectors, the system has 24 industry groups, 67 industries and 156 sub-industries. Other classification systems include The Industry Classification Benchmark (ICB) developed by by Dow Jones and FTSE and The Standard Industrial Classification (SIC) created by the US government.
The Select Sector Indices
S&P Dow Jones is also maintaining separate indexes for different sectors (The Select Sector Indices). These indices match otherwise with the normal GICS system but the Technology index includes both IT and Telecoms, making the total number of secotr indices to be only nine.