Equity Sector Performance

Three sectors in the market this year have fought back to positive returns.  They are the technology, communications services and consumer discretionary sectors.  Everything else is in the red.  Looking at the three sectors that are up helps us understand why most major market indices are either near breakeven or positive for 2020.  An index like the S&P 500 is a market capitalization weighted index.    That's simple math.  To figure out market capitalization you calculate a company's current share price and multiply by outstanding shares.  Stocks that do better see their market capitalization go up and their weighting in the index increase.  

Technology has been the world's fair for most of the last decade so it's no surprise that some of our largest tech or tech related names now dominate the index. The current Top 5 names in the SP 500 are all technology stocks.  They are  Microsoft, (MSFT), Apple, (AAPL), Amazon (AMZN), Facebook (FB) and Google (GOOGL).  These companies are about 20% of the S&P 500.  

Conversely, energy has been in the dog house for much of the last decade and its total market cap in the S&P 500 is now I think less than 4%.

Market Cap indices are really a case of the rich getting richer. 

Back early next week.

Chart Link:  Capital Spectator: "Communications, Discretionary Sectors Post 2020 Gains."  

*Long ETFs related to the S&P 500, technology, health care, real estate, industrials, financials in both client and personal accounts.  Certain accounts also own ETFs related to energy. MSFT, AAPL, AMZN, FB and GOOGL are underlying components in ETFs we hold for clients and in personal accounts.