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The 11 Stock Market Sectors And Why They Matter:

One thing doesn’t make up the stock market. It’s organized into areas that make it easy to find companies based on the types of business they do. You can see the big picture of the market through the S&P 500 (SPX) and other major stock indexes. But if you want to know what’s really going on, you can use stock market areas like energy, health care, and technology as a handy investing guidepost.

Parts of the stock market would be the rooms in a house. Each industry has its own stocks, just like each room has its own style of furniture. You wouldn’t put a dining room table in the bathroom, and you also wouldn’t mix up big companies like ExxonMobil (XOM) and Apple (AAPL).

A lot of tech stocks, like Cisco (CSCO) and IBM (IBM), are in the same room as Apple. ExxonMobil is in the same room as oil stocks, like Chevron (CVX) and ConocoPhillips (COP).

These groups make it easy for investors to see how the market for a certain business has changed over time. Different market sectors can go up and down at any time during the business day or year. A lot of the time, experienced investors know at least some of what makes these moves, even if they don’t become experts in every area.

What Are The 11 Parts Of The Stock Market?

There are 11 groups that hold all 500 stocks that make up the S&P 500, which is the biggest stock market index in the United States. When someone talks about “sectors,” they’re most likely talking about these 11. Please hold the following words as you listen:

Energy:

  • Companies that make oil and gas, build pipelines, and plants
  • Lists Halliburton (HAL), ExxonMobil (XOM), Chevron (CVX), Schlumberger (SLB), and ConocoPhillips (COP).
  • What it looks like: unstable, has paid dividends in the past, and is very responsive to commodity prices

Information Technology:

  • People who make semiconductor chips, computer gear and software, cell phones, and cloud computing
  • Among them are Apple (AAPL), Oracle (ORCL), Microsoft (MSFT), Intel (INTC), Nvidia (NVDA), and Cisco (CSCO).
  • What it looks like: prices that change a lot, focus on growth, and have high earnings rates

Consumer Goods:

  • People who make everyday things like toothpaste and detergent, grocery stores, soft drink companies, discount shops, and people who sell beauty supplies
  • It has Coca-Cola (KO), Procter & Gamble (PG), Kellogg (K), Albertsons (ACI), and Costco (COST).
  • Less unpredictable, has paid dividends in the past, and is defensive (beautiful when the market is stressed).

Consumer Discretionary:

  • Companies that make cars, planes, restaurants, hotels, department stores, clothes and shoe shops, entertainment companies, companies that make TVs and music equipment, and home builders
  • It has Ford (F), Disney (DIS), Marriott (MAR), Macy’s (M), Nike (NKE), Home Depot (HD), Tesla (TSLA), McDonald’s (MCD), and Delta Air Lines (DAL) in it.
  • What it looks like: prone to changes, focused on growth, and aware of changes in the economy

Utilities:

  • Companies that make electricity, nuclear power plants, and garbage trucks
  • This list includes Exelon (EXC), Dominion Energy (D), Entergy (ETR), and Waste Management (WM).
  • What it looks like: unstable, has paid dividends in the past, and is very responsive to commodity prices

Real Estate:

  • People who run properties, own malls, handle office buildings, and people who work for real estate investment trusts
  • It includes American Tower (AMT), Crown Castle (CCI), Simon Property Group (SPG), and Public Storage (PSA).
  • What it looks like: Stable, has paid dividends in the past, and is responsive to interest rates.

Help With Communication:

  • Help with communication
  • Companies that make video games, social media sites, Internet search engines, and live media
  • Among them are Netflix (NFLX), Meta (META), Alphabet (GOOGE), AT&T (T), and Verizon (VZ).
  • What it looks like: unstable and focused on growth

Financial:

  • Credit card companies, insurance companies, online payment companies, financial banks, and banks
  • This list includes Wells Fargo (WFC), BlackRock (BLK), Allstate (ALL), PayPal (PYPL), JPMorgan Chase (JPM), and more.
  • Interested in growth, has paid dividends in the past, and is sensitive to changes in interest rates.

Industrial:

  • Construction companies, companies that make farm equipment, companies that make airplanes, companies that work on defense (weapons), trains, and delivery services
  • Lockheed Martin (LMT), Boeing (BA), Caterpillar (CAT), FedEx (FDX), 3M (MMM), Berkshire Hathaway (BRK.A, BRK.B), and CSX are some of the companies that are in this group.
  • What it looks like: unstable, focused on growth, and traditionally a dividend payer

Materials:

  • Agricultural product producers, miners, paper, steel, and chemical manufacturers
  • Has companies like Alcoa (AA), Freeport-McMoRan (FCX), Dow (DOW), International Paper (IP), and Newmont (NEM).
  • What it looks like: fluctuating, focused on growth, generally paying dividends, and vulnerable to changes in commodity prices

Health care:

  • Drug companies, medical gadget companies, health insurance companies, and biotech
  • It has Johnson & Johnson (JNJ), Amgen (AMGN), Pfizer (PFE), Moderna (MRNA), UnitedHealth Group (UNH), and Merck (MRK).
  • What it looks like: protective, historically paid dividends

Who chooses the sectors?

MSCI and S&P Dow Jones Indices made the Global Industry Classification System (GICS) in 1999. This system put companies and industries into different groups. The area lineup is changed every once in a while. For example, GICS got rid of the telecommunications sector in the 2010s and added the real estate and information services sectors instead.

It can be hard to keep track of all the stocks because some don’t fit exactly into one sector.

What’s the point of sectors?

You can learn a lot about how the market and business as a whole are doing by keeping an eye on sectors. You could look at the SPX’s performance over the last 10 years to get a basic idea of how the market has moved, but it’s more useful to look at the performance of each stock sector over the years to see how economic trends have changed different parts of the market in different ways.

How have the sectors done?

This graph shows how the S&P 500 Index as a whole has done over one, five, and ten years, compared to how the 11 industries have done.





































KPIS FOR EACH SECTOR. Over the past 10 years, the S&P 500 Index has done very well. However, some areas have seen huge returns while others have underperformed. For example, Energy barely changed over the time, but keep in mind that its performance over the past year has been the best. S&P Global is the source of the data. The image comes from Barchart. Just to show what I mean. You can’t be sure that what you did in the past will happen again.
Source: Barchart.com

Most of the time, a good year for utilities means bad times for the business and the market as a whole. If tech stocks are doing well, it means the economy is doing well and investors are looking for smart ways to make money in the long run.

In the end:

You can see what’s hot and what’s not by following the areas, both right now and over the past year and longer. Sector information, like all market data, can’t tell you what will happen in the future. But it can show you how past economic cycles and trends have affected each area, which can help you choose how to invest your money.

Putting your investments into different areas lets you see where you might have too much or too little exposure. You might not be as affected by the ups and downs of any one section if you do this. On the other hand, sector analysis can help you focus on a specific part of the market if you want to improve your exposure in a certain sector, like technology or health care.

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