Main US Market Sectors

Stocks within the major US indices such as the S&P500 and DJIA are sub-divided into one of 11 sectors. These sectors are: basic materials, biotech, consumer staples, industrials, consumer discretionary, energy, financials, healthcare, real estate, technology and utilities.

Many investors prefer to allocate the bulk of their investment capital into a broad index like the S&P500. However, to quote Chuck Carnevale of FastGraphs:

It's a market of stocks, not a stock market.

At any particular point in time, there will be certain sectors within the S&P500 that are outperforming the rest of the index as a whole. At the same time there will be other sectors that are lagging the broad index.

An understanding of which sectors are leading and which are lagging is also useful in helping to gauge where we are in the economic cycle. An appreciation of the market's current status can help to avoid costly drawdowns and drastic underperformance by being overweight lagging sectors.