While the new ETFs provide value and growth plays, investors who are looking for long-term buying opportunities need not apply, but can seek non-leveraged ETFs with similar strategies.
“They should be seen as short term trading vehicles, and those that buy the funds should monitor them actively,” said Andy O’Rourke, Managing Director, Chief Marketing Officer at Direxion. “If investors do like the new make-up of the indexes, there are non-leveraged ETFs that provide access to them.”
In late September, the S&P Dow Jones Indices reorganized the GICS, which brought a bevy of changes in not only tech, but also communications. As technology, consumer and media industries have evolved since the dot-com bubble, so have the companies within those respective sectors, and as such, this new reclassification is meant to reflect those changes.
“The changes are a step toward acknowledging the convergence of telecommunications, media, and select internet companies and the overlapping services rendered by these companies, within the GICS Structure,” S&P noted.
Brief recap of GICS changes:
- The broadening of the current Telecommunications sector (to be renamed the Communications sector) significantly alters the Information Technology and Consumer Discretionary sectors.
- Most of the affected S&P benchmarked sector ETFs rebalanced on Friday, September 21 at the close
- Communications Services (formally Telecommunications), will increase from roughly 2% to 10% of the S&P 500.
Technology will be reduced from approximately 26% to 20% of the S&P 500.
- Consumer Discretionary will be reduced from approximately 13% to 10% of the S&P 500.
For more trends in the inverse and leveraged ETF space, visit Leveraged & Inverse ETF Channel.