S&P 500 Gets New Look as It Shuffles Some Key Companies
The line-ups of three of the 11 groups that make up the benchmark S&P 500 index are being shuffled as of Monday. Twenty companies in the index including famous names like Facebook
The most notable change will occur with the telecommunications group, currently the smallest piece of the market. It gets reinvented as communication services and grows from three to 19 companies, adding some key names from the technology and the consumer discretionary sectors.
The S&P’s changes reflect the way the communications and media industries have evolved.
The S&P index itself will still be made up of the same 500 companies, but the moves could change how investors think about them and how they approach the market. Analysts will help shape those views as they publish research on the new sector.
The stock market could become a bit more volatile since many ETFs and funds offer products that track the S&P 500’s sectors. They’ll make trades to match the changes in the S&P 500.
The three companies in the telecom group right now are
The old telecommunications sector has been considered a safe bet because
Sam Stovall, chief investment strategist for CFRA, said the new sector is characterized by “Very volatile or cyclical companies like
Consider that shares of Alphabet and
Stovall says utility companies and consumer goods makers will still act as defensive options for investors, but they’ll have to be more selective in finding companies that offer protection in an economic slowdown.
Along with Alphabet,
As they are currently comprised, the technology and consumer discretionary sectors are by far the best performing parts of the market. Both have risen about 30 percent over the last year. No other sector has risen even half that much, and the S&P 500 itself has gained 16 percent over the last 12 months. High-dividend companies have hardly moved over that time, and the telecom sector is up just 1.5 percent.
The technology sector will remain the biggest part of the stock market, although its share of the S&P 500 drops to 20 percent from 26 percent.
Microsoft
“Legacy hardware and semiconductor companies are just that, they’re legacy,” said Stovall. “Internet software and services, that’s sort of the future.”
About 60 companies will stay in the consumer discretionary sector, and Amazon