On this week’s Tape Talk, Quint and Daniel discuss the upcoming GICS sector shift. After all, what’s really in a sector?
The S&P 500 made headlines this week with a move to new intra-day highs. Many news outlets reported this new milestone as a win for the bulls by citing the longest bull market in history starting from the 2009 market lows. However, Quint dissects the numbers and examines what’s happened during this time. Has it really been nine years of sunshine and rainbows? Or, have there been some notable corrections along the way that statisticians aren’t quite giving credit for?
What’s A Sector?
Markets are divided. In fact, stocks are grouped according to various similarities. First, the numerous public companies are broken into similar sectors, 11 in total. Then, these are broken further into industry groups. While this might all seem like simple semantics, sector and industry classifications actually can have an impact on investors and markets. For instance, companies in certain sectors tend to mirror each other’s price movement due to sector-based investing. Also, certain sectors can become heavily influential in the indices as they steadily grow in size with the technology sector being the latest example as it creeps near 30% of the S&P 500 make-up.
Change Is Afoot!
Sectors are never truly static, as companies ebb and flow over time. However, investors are on the eve of one of the biggest changes to the sector landscape in recent history. At the end of September, the GICS classification for numerous stocks will change. At this time, many stocks which were previously classified as technology or consumer discretionary will be shifted to a new communications sector which steps in to replace what was the telecom sector. While many people won’t notice a change in the day to day markets it does have ripple effects for some investors.
Opportunity in the Noise.
There are times when investors can cut through some of the market noise and find opportunities lurking beneath the larger headlines. Quint walks through what he sees as one such example this week by looking at the iShares telecom ETF (IYZ) which will not be shifting to the new methodology. He’ll walk through how this name appeared on our radar and lay out how we add an investment like this into our overall portfolio. Important to note, clients of Joule Financial own the iShares telecom ETF (IYZ).