How have the sector weights of S&P 500 changed?

How have the sector weights of S&P 500 index changed in the past? The graph below shows the weightings of the index during four different years, 1979, 1989, 2006 and 2015. Examine the detailed monthly sector index data from here.

S&P 500 Sector Weights

During the past 35 years, the biggest change has happened with energy sector. At the beginning of 1980, the energy companies used to make 25% of the value of S&P 500 and was clearly the biggest sector. But currently, the weight of energy stocks is just 7%. ExxonMobil, the biggest energy company, is currently the third most valuable public company in US. Ten years ago ExxonMobil was almost twice as valuable as the second largest US company. A big negative change has also happened with material sector. During the 1980s, it was the second biggest sector but is now the third smallest.

The biggest increase has happened with financial service companies. In 1990s, the sector made up just 10% of S&P 500 but in 2006 its share was 22%, making it clearly the largest sector. But the global financial crisis of 2008 brought down the values of financial firms, temporarily dropping the sector’s weight to 11%. The sector started quickly to recover but it’s still much smaller than before the crisis. A of today, the largest financial companies are Berkshire Hathaway, Wells Fargo and JP Morgan Chase.

The biggest sector of S&P 500 today is information technology, contributing 20% to the index. During the height of the dotcom boom at the end of 1990s, the weight of IT was 35% but quickly dropped under 20% after the bubble bursted. The current top ten most valuable companies of the index consists of three IT companies: Apple (1st), Microsoft (2nd) and Facebook (9th).

The sector weighting of S&P 500

S&P Dow Jones is classifying the companies part of their indexes using Global Industry Classification Standard (GICS) system that the company created together with MSCI Barra. A firm is classified based on its principal business activity. Revenues are used as the key measure but earnings and market perception are also taken account during the review process. The classification of a firm is not set to stone but it can change for example due to major corporate actions. Also the entire classification system is reviewed annually and can be changed if S&P Dow Jones recognizes a need for it. Read more from here.

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