Below is an updated snapshot of S&P 500 sector weightings. As shown below, the Technology sector makes up the largest piece of the pie at just over 1/5th of the index. Financials ranks second with a weighting of 15.96%, followed by Health Care at 14.74%. After Health Care comes Consumer Discretionary at 12.94%, then Industrials at 10.09%, and Consumer Staples at 9.97%. The Energy sector is the 7th largest (or 4th smallest) of the ten with a weighting of 7.14%. That’s actually up from readings in the mid-6s at the start of 2016. The three smallest sectors are Utilities, Materials, and Telecom. When combined, these three sectors aren’t even as large as the Consumer Staples sector.
Below is a chart that shows historical trends in sector weightings going back to 1990. Back then, Technology was actually one of the smallest sectors, while Industrials, Consumer Discretionary, and Energy were the largest. But there was much more balance within the index back then. No sector made up more than 15% of the index, and no sector had a weighting of less than 6%. Today, the three largest sectors of the index have a combined weighting of 51%, while the three smallest sectors combine for just 8.7%. You can see that things really got out of whack during the Dot Com boom when Tech skyrocketed to a weighting of more than 30%. After the Tech bubble burst, Financials began to grow and grow and grow until it got as high as 22.5%. Since the Financial Crisis, Technology has regained its lead as the largest sector of the market.
Another thing that the chart below highlights is the dramatic shift that the US economy has experienced away from manufacturing and into services.
Below we provide historical S&P 500 weighting charts for each sector going back to 1990. The red line represents each sector’s average reading over the entire time period, so you can see which sectors are currently above or below their long-term averages. Technology, Health Care, and Consumer Discretionary are the three sectors with readings above their long-term averages, while Energy, Industrials, Materials, Utilities and Telecom are all below. Financials and Consumer Staples are currently trading pretty much right in-line with their historical averages.