Sector Volatility: 2007's Winners & Losers

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%

Materials +21.58%

Tech +17.27%

Utilities +16.93%

Cons. Staples +13.04%

Telecom +11.18%

Industrials +10.87%

Healthcare +6.48%

Cons. Discretionary -13.85%

Financials -21.21%

Questions? Comments?