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Topic of the Week: Sectors - 4/10/24

Sectors Overview:

Sectors - distinct categories or industries within the broader financial market, encompassing areas such as banking, insurance, investment management, and real estate.

  • There are 11 stock market sectors, as coordinated by the Global Industry Classification Standard (GICS).

  • Sectors make it easier for investors to have more accurate depictions of how different regions of the market are doing.

  • Sectors help investors organize and categorize their portfolio which helps with devitrification



Energy - companies involved in the production, exploration, refining, distribution, and sale of energy resources such as oil, natural gas, coal, and renewable energy sources like wind and solar power.

  • Largest stocks in this sector are Chevron and ExxonMobil.

  • Factors in performance include: Geo-political tensions (ex. Russia and Ukraine conflict affected gas prices), access to materials, and changes in technology.




Financial - institutions and businesses involved in managing and facilitating monetary transactions, including banking, investment services, insurance, and asset management.

  • JP Morgan Chase and Berkshire Hathaway are the biggest companies in this sector.

  • Factors in performance include: inflation (rising interest rates), investors, and consumer debt levels.

  • Best to invest in when there's a belief that the market has undervalued or overlooked their potential for future growth



Industrial - companies involved in the manufacturing of goods, construction, engineering, and the provision of industrial services.

  • does not rely on the general consumers in the population, but tends to produce equipment for other corporations that do provide products for general consumers in the market.

  • Specific industries in this sector include aerospace, transportation, construction, and engineering.

  • Boeing and Union Pacific are the biggest stocks in the industrial sector.

  • Factors in performance include: access to resources, government policy and regulations

  • Best performing in cyclical stages or phases of economic recovery or expansion




HealthCare- industries related to the provision of medical services, pharmaceuticals, biotechnology, medical equipment, and healthcare facilities.

  • Has two smaller sectors: one being the companies that develop medicines and treatments like biotechnology, and the other sector being the distribution of healthcare goods and services like health insurance and soap.

  • The two biggest stocks in the sector are Johnson and Johnson and UnitedHealth Group.

  • Factors in performance include: cybersecurity, technology improvements, and price transparency.

  • Best performing as a growth sector so during economic expansions and periods of innovation.



Technology- companies that are involved in the manufacturing and development of technology products.

  • This can be through software engineering, producing computer parts, or creating new equipment like phones.

  • The biggest companies in this sector are Apple and Microsoft.

  • Factors in performance include: Accessibility of resources, policy, and overall growth of the economy.

  • Best performing as a growth sector so during economic expansions and periods of innovation.



Utilities- companies involved in the generation, transmission, and distribution of essential services such as electricity, natural gas, and water to residential, commercial, and industrial customers

  • Electrical energy producers fall within this region, though it may be intuitive that they fall under the energy sector.

  • The largest companies in this sector are Duke Energy and American Electric Power.

  • Performance factors include demand for fuel, natural resource policy/conservation, and financials.



Consumer Discretionary- goods and services that are non-essential or optional for consumers, including items such as luxury goods, entertainment, travel, and dining out

  • These companies are dependent on consumer demand, so as the economy does well so will these companies.

  • The biggest companies in this sector are Amazon and McDonalds.

  • Factors in performance include: consumer spending, consumer confidence, and rates (wage, inflation, etc.).



Materials- companies involved in the extraction, processing, and production of raw materials such as metals, chemicals, paper, and forestry products.

  • Material companies include mining, chemicals, construction material, lumber, and etc..

  • The biggest companies in this sector are Sherwin-Williams and DuPont.

  • Factors in performance include: inflation, geo-political tensions, preservation of resources, and demand of certain resources.



Consumer Staples- companies that sell goods and services that consumers are likely to buy no matter what financial circumstance they are in.

  • These things include food, drink, personal care, etc..

  • Coca-Cola and Procter & Gamble are two dominant players in this sector.

  • Factors in performance include: the overall progression of the economy, government policy, product trends, inflation, and consumer spending.



Real Estate- the buying, selling, leasing, and development of properties, including residential, commercial, and industrial real estate assets.

  • Real estate development is the development of projects like buildings, and management is obtaining tenants for certain properties.

  • American Tower and Simon Property Group are of the top stocks in this sector.

  • Factors in performance include: inflation, demographics, and consumer spending.



Communication Services- telecommunications companies and social media service companies.

  • It is a relatively new sector, and these services used to be incorporated into other sectors.

  • Social media companies like Facebook(Meta) and the engine Alphabet dominate this sector.

  • Factors in performance include: technological innovations, consumer spending, and general progression of the economy



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