By Dave Haviland, Portfolio Manager and Managing Partner
I have spent the last several weeks travelling around the country visiting advisors and clients and speaking at events. At each meeting, I ask my audience if they are aware that the S&P 500® Index is about to undergo the largest reconfiguration in its history. So far, the resounding answer has been “no” so we thought it was important proactively help educate about this significant change with another memo From the Desk of the PM!
Recently the GICS (Global Industry Classification Standard) index manufacturers, together with S&P Dow Jones Indexes, announced that they were going to re-align the sectors of the S&P 500. The major changes include:
- Renaming the Telecommunications Sector to Communications.
- Pulling out ~18 media and entertainment companies from Consumer Discretionary and adding them to Communications, including Netflix, CBS and Walt Disney.
- Pulling out ~5 entertainment and software services companies from Technology and adding them to Communications including Google and Facebook.
- Pulling ~one Technology company, EBAY, and adding it to Consumer Discretionary.
Graphically, the changes will look like:
To summarize, these changes will result in a 6% reduction in the size of the Technology Sector and a 3% reduction in the size of the Consumer Discretionary Sector. The new Communications Sector will be about 10% of the market Cap of the S&P 500.