How Do Sector Changes Affect Benchmark Indices?

From Reuters to Marketplace, economic and financial news shows like to ‘do the numbers.’ They often review economic indicators, Federal Reserve rate changes, or benchmark index performance.

In general, these statistics are intended to help people gauge how economies and markets are performing. For instance, when Gross Domestic Product (GDP) – the value of all goods and services produced by a nation during a certain period of time – moves higher, it means the economy grew during the period. When GDP moves lower, the economy contracted during the period.

Asset managers and investors rely on benchmark indices, like the S&P 500 Index, to measure the relative performance of investment portfolios. The S&P 500 is a benchmark for large U.S. company stocks. It includes companies from diverse sectors including:

Information technology
Healthcare
Financials
Consumer discretionary
Industrials
Consumer staples
Energy
Utilities
Real estate
Materials
Telecommunications services

But, wait, change is coming!

Soon, benchmark indices will have a new sector. At the end of September 2018, Telecommunications Services will become Communication Services. The name is changing and so are the companies that will be included in the sector. Ben Levisohn at Barron’s reported:

“The biggest changes will be around some prominent companies that will migrate out of the information-technology and consumer-discretionary sectors and into a new communication-services sector…[The changes] certainly don’t herald any fundamental changes for the companies involved. But they do have the potential to create short-term noise…”

If you’d like to learn about the ways sector changes may affect benchmark indices, give us a call at 877-340-1717.

WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013
California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717

Website: www.womackadvisers.com

Comments

Womack Weekly Commentary: September 18, 2017

Womack Weekly Commentary September 18, 2017 The Markets “In theory, there is no difference between theory and practice, in practice there is.” Yogi Berra was talking about baseball, but the concept also applies to diversification, according to the GMO White Paper, The S&P 500: Just Say No . From the title, you might think the authors – Matt Kadnar and James Montier – don’t like U.S. stocks. They do: “Being a U.S. equity investor over the past several years has felt glorious. The S&P 500 has trounced the competition provided by other major developed and emerging equity markets. Over the last 7 years, the S&P is up 173 percent (15 percent annualized in nominal terms) versus MSCI EAFE (in USD terms), which is up 71 percent (8 percent annualized), and poor MSCI Emerging, which is up only 30 percent (4 percent annualized). Every dollar invested in the S&P has compounded into $2.72 versus MSCI EAFE’s $1.70 and MSCI Emerging’s $1.30.” The au

Another Tornado Record's in Sight for U.S. as Thunderstorms Boom

Bloomberg by Brian K Sullivan Another wave of tornado-spawning thunderstorms is set to rip across the Great Plains and South this week, putting the U.S. within reach of a record year for life-threatening twisters. Severe storms will drench a swath of the country from Texas to Mississippi over the next five days, according to the U.S. Storm Prediction Center. Through Thursday, 369 tornadoes have been reported across the country, the most in five years and more than double the normal number of sightings. An active jet stream and unusually balmy weather are to blame for the burst of deadly tornado activity, the storm prediction center said. Strong winds have dragged storms into the warm, humid air that’s blanketed the eastern half of the nation, creating conditions ripe for a weather phenomenon that leads to at least $400 million in damage a year in the U.S. “We have a severe threat starting today and continuing for each of the next five days through at least Monday

Pandemic-Driven Demand Is Providing Fuel for Investors

For four weeks, the U.S. stock market has sparked and sputtered like a campfire in light rain. Today, pandemic-driven demand is providing fuel for the investors. The need for certain types of products and services has accelerated and innovation is creating new opportunities. Consider: · Technology . Today, digital technologies support nearly all group interactions, which has accelerated innovation. Traditional video communications platforms are in high demand, and multi-person virtual platforms are emerging. Robotics innovations are racing ahead, too. Robotic dogs enforce social distancing in Singaporean parks, reported Accenture. Other types of robots sanitize streets and facilitate contact-less delivery around the globe. · Consumer products and services . COVID-19 increased demand for staples, cleaning, and personal hygiene products. The virus may have inspired deeper and longer-lasting changes in consumer behavior, too. Accenture reported people are favor

Womack Investment Advisers

Search This Blog