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Tag Archives: S&P 500 Sectors

Dec 6, 2023

Happy Days for How Long?

With less than a month left to go to close out the year, it’s a good time to reflect on the highs and lows that market participants have experienced. While the year began with a rocky start due to the Silicon Valley Bank collapse, the market continued to power forward, stumbling in Q3 as 10-year…

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May 19, 2023

Disentangling Diversification

We frequently hear that “it’s a stock picker’s market.” The recent market environment could equally well be characterized as a sector picker’s market. To measure the importance of sectors, we decompose total market dispersion into within-sector and cross-sector effects. Exhibit 1 shows that the contribution of cross-sector effects to total S&P 500® dispersion has trended…

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Jan 19, 2023

Examining Tactical Approaches to Sectors

Why does sector dispersion matter and how can it inform tactical approaches to sectors? S&P DJI’s Elizabeth Bebb and Invesco’s András Vig explore how sector dispersion can impact long-term asset allocations.

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Jun 3, 2022

These Go to 11: Diversification with S&P 500 Sectors

Many strategies (including passive ones) hold large allocations to Information Technology. A “barbell” approach can mitigate risk from high exposure to one sector by pairing it with another. Do you remember sending your first email? For many, it was likely around the mid-1990s when a “googol” was still 10^100 rather than a verb and the…

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Mar 30, 2022

Sizing Sectors

After peaks in S&P 500® concentration, the S&P 500 Equal Weight Index has tended to outperform, suggesting that there is a relationship between changes in concentration and the relative performance of equal weighting. But, does this relationship also occur at the sector level? Using the historical adjusted HHI (Herfindahl-Hirschman Index), we’ve previously established that concentration…

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Mar 14, 2022

Contemplating Concentration

After the exceptional performance of large-cap stocks in recent years, concentration concerns naturally come to mind. There are many ways to measure concentration. A simple method is to add up the weight of the top names, but the drawback with this approach is it doesn’t incorporate all the constituents in an index. The Herfindahl-Hirschman Index…

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Mar 8, 2022

No Easy Answer: Sector and Factor Responses to U.S. Rate Hikes

Although higher rates are generally seen as negative for risk assets, the initial stages of a monetary tightening cycle have not been disastrous for the U.S. stock market historically. However, while the overall market may muddle through just fine, the same may not be true for the different sectors and factors that compose a broad…

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Nov 20, 2020

The Market Is Up, But So Is Volatility

So far, 2020 has brought us a global pandemic, a coordinated global economic shutdown, and, in the U.S., a notably contentious election. So it’s no surprise that volatility has been, and remains, elevated. Despite all this, equities have fared reasonably (some would say surprisingly) well, with the S&P 500® climbing 13% through Nov. 19 since…

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Sep 21, 2020

Sectors and Electors

Markets expect elevated volatility surrounding the U.S. Presidential election, now just six weeks away. The VIX futures curve currently peaks in November, but as long ago as April a close observer could detect expectations of electoral volatility. Increased volatility may create an unusual opportunity for sector allocators. To understand why, we need to remember that…

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Aug 21, 2020

A Stable Regime

In recent days the S&P 500 reached multiple new highs, despite the still-uncertain nature of the economy’s recovery from the COVID-19 pandemic. Year to date through Aug. 20, 2020, the S&P 500 is up 6% while the S&P 500 Low Volatility Index is down 6%. Market volatility remains high, as evidenced by the charts in…

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