Market Beat: The sectors of the stock market
July 19, 2018
The stock market is broken down into 11 different sectors. The sectors are determined by GICS, which stands for Global Industry Classification Standard. They are upgraded periodically to keep pace with our ever-evolving global economy.
It's useful to categorize corporations into sectors to compare how they are performing at different phases of the economic cycle. The sectors are further broken down into industry group classifications, then industries and sub-industry classifications. Right now, there are 24 industry groups, 68 industries and 157 sub-industries.
Energy is one of the sectors and it consists of companies in the oil, gas and coal industries that produce fuels and provide equipment and services. The Energy sector has been leading earnings growth for the last couple of quarters.
The Basic Materials sector is made up of companies in the Metals and Mining, Chemicals, Construction Materials, Containers and Packaging and Paper and Forest Products industries.
Communications Services has had some recent changes now includes companies in Media and Entertainment as well as Telecommunications companies, both wireless and traditional.
Consumer Discretionary stocks are companies that make products that are big ticket items for most consumers. Automobiles, motorcycles, hotels, restaurants and leisure products fit into the Consumer Discretionary or Consumer Cyclical sector. The Media industry was recently moved from Consumer Discretionary over to Communications Services.
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Consumer Staples are items like food, beverages and household and personal products. These are basic everyday items that everyone needs, and Consumer Staples can be a good defensive move at times when the economy is slowing down.
Health Care is made up of pharmaceuticals, bio technology, healthcare equipment and health care providers. Financials are banks, insurance companies and other financial services. Real Estate was recently removed from the Financials sector into it own sector. Mortgage real estate investment trusts are still part of the Financials sector.
Information Technology stocks are the technology companies in the software and computer services business.
Utilities are the companies that provide electrical, gas and water.
Real Estate is a relatively new sector and consists of REITS, real estate investment trusts and real estate management and development companies.
Lastly, the Industrials sector has the industrial companies that manufacture a variety of products. Some of the industries include Aerospace and Defense, Building Products, Machinery and Construction & Engineering.
GICS will make changes as needed to try and keep the classifications as current as possible.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.