As we approach the end of the year, one thing is clear: It's been a long time since we have seen the sector volatility that we have seen this year. Look at the disparities: energy up 34% -- but financials down 21%. Materials up 21%, but consumer discretionary (autos, builders, retailers) down 13%.
This is having an effect on the construction of the S&P 500 As most of you know, the S&P is a market-cap weighted index (market capitalization is price times shares outstanding), so the larger companies have a bigger weighting in the index.
Financials have now clearly lost ground in the S&P. In the beginning of the year, financials were 22.3% of the S&P 500; today it is 17.7%, a drop of almost 5 percentage points -- that is BIG.
By contrast, technology, which had a good year, is increasing its weighting: It started out as 15.1% of the S&P; today, tech is 16.9%.
What it means: financials will not move the S&P quite as easily as it did last year, just as techs did not have the influence on the S&P after the tech crash in 2000.
Here are the 10 sectors of the S&P 500 year to date:
Energy + 34.06%
Cons. Staples +13.04%
Cons. Discretionary -13.85%
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