Below is an updated snapshot of current S&P 500 sector weightings. As of the close yesterday, the Technology sector’s weighting had crept up to 20.70%. That’s just about five percentage points higher than the next biggest sector — Financials — at 15.72%. Health Care has really outperformed lately, bringing its weighting up to 15.25%. The three largest sectors — Technology, Financials, Health Care — now make up more than 50% of the market (51.67% to be exact)! The three smallest sectors — Telecom, Utilities and Materials — only make up 9.15% of the market. It’s also worth noting that the Energy sector’s weighting has dipped back below 7% once again as oil prices have entered a new bear market.
Below is a historical look at S&P 500 sector weightings going back to 1990. This allows you to see how the US has shifted from a more balanced economy to one that is now dominated by non-manufacturing sectors. We mentioned above that the three largest sectors now make up more than 50% of the market while the smallest three make up just 9.15%. Back in 1990, the three largest accounted for 42% of the market, while the three smallest had a combined weighting of 20.30%.
In the chart below, the Tech bubble of the late 1990s also stands out. In February 1990, the Tech sector had a weighting of just 6.34%. It was the second smallest sector at that time ahead of only Utilities which had a weighting of 6.18%. By the peak of the Tech bubble in March 2000, the Technology sector’s weighting had risen to 34.81%! After the Tech bust, it was the Financial sector’s turn to take the reigns. By September 2006, the Financial sector’s weighting had ballooned up to 22.35%. That put it more than seven percentage points larger than Tech, which was the second largest sector at the time with a weighting of 15.19%. The Financial sector’s purpose is to service the economy. Anytime that sector ends up becoming the largest sector of the market, it’s a sign that things are off kilter.
Below we provide historical weighting charts by sector going back to 1990. For each sector, the red line represents its average weighting over the entire 26-year period. This allows you to see which sectors are currently above or below their long-term averages. At the moment, Technology and Health Care are the only two sectors solidly above their long-term averages. Energy, Industrials, Materials and Telecom are the farthest below.