Stock Market Sectors

For example, XLV tracks the health care sector, and technical analysis on XLV’s price action may give you insight into the health care sector as a whole. 2022 has been a challenging year for the markets as high inflation has caused the Federal Reserve to raise interest rates six times this year. Given the interest rate increases, many stocks have declined as the rising rates have softened demand for many companies. With potentially more interest rates in the future, economists think there could be a recession next year. As a result, there could be more downside if economic data fails to meet expectations. Generally, however, many investors believe in the power of diversification.

In recent years, the big six stocks have included powerhouses like Apple (AAPL), Microsoft (MSFT) and Alphabet (GOOG). In the materials sector, you’ll find companies that offer needed materials for various parts of the manufacturing process. That includes  chemical makers, paper makers, agricultural commodity companies, and steel companies.

Industrials

The financial sector includes some of the largest financial companies in the world like Visa (V), JPMorgan Chase (JPM), and Bank of America (BAC). Examples of large communication services companies include Alphabet (GOOG) and AT&T (T). A stock sector is a collection of publicly-traded companies that work within the same general field of business—healthcare, energy, real estate, etc. They can change over time, based on market cap, but they are the stocks at the top of the list.

These groupings help investors clearly track a given industry’s market performance through time. On any trading day, or over the course of a year, some sectors may climb while others sink. Seasoned investors typically have at least some idea what drives those different moves, even if they don’t necessarily become experts on every sector. The energy sector includes some of the largest energy companies in the world, such as Exxon Mobil (XOM) and Chevron (CVX). On the other hand, as the economy does well and climbs toward the peak of its cycle, the consumer discretionary and communication services sectors tend to do better. The consumer discretionary sector contains companies that rely on consumer discretionary spending and demand.

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Periods of recession, like the 2008 financial crisis, tend to lower house prices, but their effects tend to be short-lived and house prices then continue to trend upwards. A sector breakdown is the mix of sectors within a fund or portfolio, typically expressed as a portfolio percentage. Sector designations can vary depending on the fund’s investment criteria and overall objective.

• Companies in the sector include American Tower Corp., Boston Properties, and Equinix.
• On the other hand, as the economy does well and climbs toward the peak of its cycle, the consumer discretionary and communication services sectors tend to do better.
• All investing involves risk, including the possible loss of money you invest.
• Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC (“QAI”), an SEC-registered investment advisor.
• This space is among the top three sectors in growth between 2012 and 2022, and there’s a good chance that health care will only continue to evolve in the future.

Stock market sectors group together companies that are active in related industries. The Global Industry Classification Standard (GICS) is the primary classification of stock market sectors. By dividing your investments into sectors, you can see where you might be overexposed or underexposed. This can help you avoid being overly sensitive to the slings and arrows of any one segment.

A List of 11 GISC Stock Market Sectors

These “recession-proof” companies stem from industries like food and beverage, alcohol and tobacco and household goods. While the majority of markets are concerned about rising yields and higher rates in the economy, large financial institutions will benefit from higher rates. Therefore, more attention will need to be paid to the shares of banking houses and insurance companies. For the banking sector, this will https://g-markets.net/helpful-articles/candlestick-patterns-to-master-forex-trading-price-2/ be an opportunity to further increase the margins that have fallen since the beginning of the pandemic, when rates in the economy fell sharply. Given the expected increase in consumption, we should also pay attention to the consumer sector. Joe Biden’s latest stimulus package of less than $ 2 trillion, which includes, among other things, direct $ 1,400 checks to American citizens, should play a big role there.

Low interest rates encourage individuals and businesses to borrow money, which increases Financials sector revenues. The communication services sector is among the newest of the GICS sectors and includes a couple of major areas that used to be part of other sectors. At the other end are media and entertainment companies, including both older media like television and radio and interactive media via the internet and newer forms of communication. Before buying sector funds, you should keep in mind that putting too much capital into one sector can increase the risk to your portfolio. It’s smart to diversify your investments and portfolio and consider a variety of sectors, stocks, and funds.

Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Stocks in the same sector are usually companies in the same industry or in a related field.

Consumer Staples

These are professionally managed both passively and actively, depending on the theme. Mutual funds allow you to own many positions in the sector so that a single stock disaster won’t hurt as much with the risk spread out. The downside of mutual funds include the lack of transparency when buying or selling since you don’t know the price until after the close. These market sectors help to comprise benchmark indices such as the S&P 500 Index, which is a widely accepted measure of the performance of the stock market and the economy.

It also includes restaurants, hotels and consumer retailing, among others. This sector is sensitive to economic cycles, so when the economy grows, these companies tend to grow much more quickly, though when it slows, this industry typically slows even more. The communication services sector consists of companies that keep people connected.

Instead, the best diversified stocks are arguably very popular leading ETFs such as the Vanguard 500 Index Fund ETF (VOO). For many investors, finding the best diversified stocks would be to own an ETF like the Vanguard 500 Index Fund ETF (VOO) which includes all 500 stocks in the S&P 500 index automatically. The Vanguard 500 Index Fund ETF (VOO) would also be considered as a contender for ranking among the best diversified stocks given its low costs and its large AUM. In terms of diversification, there are many different types including diversification through asset class. A classic example is where an investor invests 60% in leading equities and 40% in leading bonds. Another example of diversification is by diversifying through industry sector.

Real estate sector

Grouping stocks by sector helps investors compare the performance of similar stocks, and aids you in diversifying your portfolio. Large fund companies that managed index-based funds had to buy more of these real estate stocks in order to match the new weightings in the sector index. There are 11 stock market sectors, according to the Global Industry Classification Standard, or GICS, which is an industry taxonomy developed in 1999 by MSCI and Standard & Poor’s. Within the entire GICS structure, there are 11 sectors, 24 industry groups, 69 industries and 158 sub-industries into which all major public companies are categorized.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. Oil prices have a strong bearing on the performance of Energy companies, although different companies are affected differently. Producers of oil perform strongly during periods while its price is high, but oil refiners benefit when oil prices are lower.

Applying Social Sentiment to your stock research

You can use this knowledge to diversify and capture upsides across industries and market conditions throughout your investing career. Certain financial information included in Dividend.com is proprietary to Mergent, Inc. (“Mergent”) Copyright © 2014. Helpful articles on different dividend investing options and how to best save, invest, and spend your hard-earned money.