After market close on March 17, S&P Dow Jones Indices and MSCI Inc. will implement changes to the GICS structure that will involve reclassifying firms across five of the GICS sectors. To learn more about these changes, read our blog, “2023 GICS Changes: Companies Impacted and What You Need to Know.”
And for a deeper dive into the changes and the SPDR Sector and Industry ETFs that will be affected, read our GICS Structure Changes FAQs.
Sector ETFs are a powerful tool for investors, offering a straightforward way to incorporate simple or sophisticated sector strategies with precision and transparency. And with $685B in AUM,1 it’s clear that equity sector ETFs are more than just a trend.
Powerful Portfolio Construction Tools
Sectors divide the economy into groups of companies that operate similar businesses or provide related products and services. Creating these segments enables in-depth analysis of market dynamics to see which parts of the economy are flourishing — or lagging — in order to find pockets of potential out performance.
Sector investments provide targeted exposure to these economic segments, giving you a wide variety of options to enhance the core of your equity portfolio and adapt to changing market cycles with agility and precision.
Using sector-based investment strategies can help you align and adjust your portfolios based on macroeconomic or thematic trends, like clean energy and declining interest rates, changing stock fundamentals, or shifts in technical indicators, like momentum.
Sector strategies can help you:
Read more about each of these investment cases in Four Reasons to Implement a Sector Strategy.
Ready to evaluate a sector or industry allocation? Use these resources to guide your decision making.
Sector & Industry Dashboard
Spotting Sector and Industry Trends
When you’re ready to implement a sector strategy, you can consider carving out a portion of your US equity exposure for sectors. Then, choose your sectors based on these types of analysis:
Analyze business cycles to rotate towards sectors that could potentially benefit more from the current economic phase.
Survey macroeconomic data (oil, inflation, rates) to position according to changes in certain macroeconomic variables. Identify cyclical or secular industry trends to harness the growth potential within a particular segment of the economy.
Use aggregated company-level data to identify sectors with attractive fundamental characteristics, such as cheaper valuations and/or stronger earnings sentiment.
Evaluate recent performance to overweight/underweight sectors with strong price momentum.
Investing in sector ETFs can be an efficient way to implement sophisticated strategies with precision and transparency.
ETFs can offer:
Let our Investment Solutions Group (ISG) do the work. The SPDR® SSGA US Sector Rotation ETF (XLSR), combines tactical overweights and underweights of S&P 500 sector ETFs based on ISG’s sector return forecasts and research, which includes a proprietary, quantitative sector selection model.
State Street Global Advisors launched the world’s first suite of sector ETFs in 1998, and continues to expand on that heritage to help investors precisely meet their desired sector exposures.
World’s largest sector ETF provider 3
Average trading volume than the next-largest competitor 4
Managing sector ETFs
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1 Bloomberg Finance L.P., as of 03/31/2022.
2 Bloomberg Finance L.P., as of 03/31/2022.
3 Bloomberg Finance L.P., as of 03/31/2022.
4 Bloomberg Finance L.P., as of 03/31/2022. Based on total assets, 3-month average trading volume and 30-day average bid/ask spread.
Global Industry Classification Standard (GICS)
A financial-industry guide for classifying industries that is used by investors around the world. The GICS structure consists of 11 sectors, 24 industry groups, 68 industries and 157 sub-industries, and Standard & Poor’s (S&P) has categorized all major public companies into the GICS framework.
An investor or portfolio that invests assets into one or more sector of the economy. The Global Industry Classification Standard (GICS) consists of 11 sectors: Communication Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care,Industrials, Information Technology, Materials, Real Estate, and Utilities.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA's express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
Returns on investments in stocks of large US companies could trail the returns on investments in stocks of smaller and mid-sized companies.
Because of their narrow focus, sector investing tends to be more volatile than investments that diversify across many sectors and companies.
Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs.
Diversification does not ensure a profit or guarantee against loss.
There can be no assurance that a liquid market will be maintained for ETF shares.
Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.
Actively managed ETFs do not seek to replicate the performance of a specified index. Because the SPDR SSGA Active Asset Allocation ETFs are actively managed, they are therefore subject to the risk that the investments selected by SSGA may cause the ETFs to underperform relative to their benchmarks or other funds with similar investment objectives.
Concentrated investments in a particular sector or industry tend to be more volatile than the overall market and increases risk that events negatively affecting such sectors or industries could reduce returns, potentially causing the value of the Fund’s shares to decrease.
Passively managed funds invest by sampling the Index, holding a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the Index.
Select Sector SPDR Funds bear a higher level of risk than more broadly diversified funds. All ETFs are subject to risk, including the possible loss of principal. Sector ETFs products are also subject to sector risk and nondiversification risk, which generally results in greater price fluctuations than the overall market.
Investing involves risk including the risk of loss of principal.
Non-diversified funds that focus on a relatively small number of securities tend to be more volatile than diversified funds and the market as a whole.
Investments in small/mid-sized companies may involve greater risks than in those of larger, better known companies.