Jun 12, 2018
Below is an updated look at S&P 500 sector weightings. As shown, Technology now makes up more than a quarter of the pie, while Financials, Health Care, and Consumer Discretionary are the next largest sectors (in that order).
Notably, the Consumer Discretionary sector’s weighting of 13.03% is nearly twice as large as the weighting of 6.61% for Consumer Staples. Below is a chart showing the spread between the weighting of the Discretionary sector vs. the Staples sector. At +6.42 percentage points, the spread is at a record high going back to 1990.
The record spread between Discretionary and Staples certainly tells us that the economy has been rolling, but it should also start to offer a bit of a warning sign for investors. The prior record for this spread came at the very end of the Dot Com boom of the late 90s, when Tech was on fire (as it is now) and the economy was also rolling. The low for the spread came at the depths of the Financial Crisis in early 2009. It’s not rocket science — you know which of these two points in time was the better buying opportunity for investors!
May 11, 2018
In this week’s Bespoke Report, one of the many topics covered was market weightings and market caps. The bubble chart below shows representations of the size of the large-cap S&P 500, the mid-cap S&P 400, and the small-cap S&P 600. When we speak with a lot of investors, we often hear these asset classes discussed like they are interchangeable. The reality is that they are very different. The S&P 500 is 29 times the size of the S&P 600 small cap index. Therefore, while it has little impact for an individual investor, collectively speaking, any new money in (or out) of the market will have a much more significant impact on small caps than it will on large caps. Think of it like dropping an ice cube in a full glass of water versus a bathtub.
A second chart we wanted to highlight was sector weightings by market cap. While the Technology sector’s weighting is abnormally large in the S&P 500 large-cap index at over 25%, within the small and mid-cap indices, it is at a much more reasonable level of around 15%. In the small and mid-cap indices, the sector that has an abnormally large weighting is actually Industrials. Whereas the sector’s weight is under 10% in the S&P 500, it has a weighting of over 15% in the S&P 400 mid-cap index and a weight of over 18% in the S&P 600 small cap index.
With these weighting abnormalities in mind, when the Technology sector rallies, it has an exaggerated impact on large caps relative to small and mid caps, while an Industrials led rally has a more positive impact on mid and small caps.
As mentioned above, these charts are from our just-published weekly Bespoke Report newsletter, which provides an in-depth review of recent market action and events. To read this week’s Bespoke Report in its entirety, start a two-week free trial to any Bespoke membership level by clicking the button below.
Sep 2, 2015
Below is a snapshot of current S&P 500 sector weightings. As shown, Technology stocks currently makes up 20.01% of the index, while Telecom stocks make up just 2.45% of the index.
The reason we’re highlighting sector weights is to show just how much weight Energy has lost. After making up more than 15% of the S&P 500 when oil peaked back in early 2008, Energy has lost more than half of its weighting in the index. As of today, Energy stocks make up just 7.15% of the index, and it was in the 6s just a few days ago. With an average weighting of roughly 9.5% historically going back to 1990, Energy is currently well under its “normal” reading. That’s what happens when oil prices crash and the sector enters a bear market. If you’re a long-term investor that likes to “buy low and sell high,” you’d be “buying low” relatively speaking right now.
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Mar 8, 2015
At the end of each week’s Bespoke Report newsletter, we publish an updated snapshot of our Bespoke Model Stock Portfolio. Below is a snapshot of the portfolio with sector weightings and performance numbers included, but the individual stocks are blocked out.
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