US Sectors: Charts
When people buy the S&P 500, they buy the 500 largest US firms in ratio to their market cap. These firms spread across industries, and so the exposure of one’s portfolio to the various sectors depends not on the importance of a particular sector in the GDP, or its need in the current economy – but by the size of the largest firm(s) in the space.
Still, markets are cyclical and one may choose to increase ones exposure to a particular sector in order to boost performance in certain times – or alternatively verify the current price of a sector with relation to the overall market in order to better understand public expectations and potentially risk.
The weightage of the S&P500 for each sector on May 23, 2021
At the time of this writing, the S&P500 has the largest weigtage in the technology sector – primarily driven by the fact that Aaple, Amazon, Microsoft, and Facebook are essentially monopolies in their individual spaces and have the largest market cap for individual companies in the US.
The smallest market caps belong in utilities, energy, materials and real estate. Partly due to government intrusions when monopolies formed in these sectors and also the inefficiencies of scale in real estate.
The charts below will show what the ratio of each of these sectors is in the current market cycle, with a historical perspective. Changes in this ratio over time may determine the importance of a particular sector in a current economy, or (more likely) speculation towards performance of a particular sector in a current time. A historically high or low ratio can never be a sole indicator as to whether to buy or sell a particular sector – but its always good to reference these charts, and personally – i would caution against a buyer from buying a sector at the peak of its speculation.
Nasdaq 100 (Technology Sector) / SP500 Ratio
Normally we would use the VGT, but due to the sizes of the leading tech firms, the Nasdaq 100 almost perfectly matches tech sector performance and offers a longer historical time frame