Mr. Market isn’t always right, but quite often he imparts valuable information. No, he won’t whisper the secret to easy money in your ear. But he’s always willing to provide some perspective, which comes in handy every now and again if only to remind investors that capital flows are forever evolving.
With that in mind, we crunched the numbers on the 10 major sectors that comprise the S&P 500 in search of a closer look at the internal dynamics of the U.S. stock market. All data is courtesy of Standard and Poors as of the close of trading on Tuesday, November 13.
First up is everyone favorite’s metric: performance. For the year through this past Tuesday, the energy sector remained firmly in the lead among the S&P sectors, as our chart below shows. Following in close pursuit was the second-place materials sector with information technology in a respectable third-place showing. Financials, by contrast, were dead last, posting a loss for the year of nearly 14%. Consumer discretionary stocks are the only other sector with red ink this year as of this past Tuesday.

Mr. Market speaks with several voices, of course, and performance is but one. Another is market capitalization, a related by not necessarily mirror image to performance. Now is as good a time as any to gauge market cap trends over time and by that measure energy is again the big winner over time. As our second chart below shows, the relative share of energy sector in the S&P 500’s market cap jumped 20% for the five years through this past Tuesday. Meanwhile, financials and consumer discretionary shed nearly 15% of their respective market caps over that stretch.

But don’t cry for financials just yet. Although they’ve been battered recently, the sector remained firmly in the lead in terms of absolute market capitalization. For good or ill, investors still think financials deserve the lion’s share of market capitalization, as our third chart below illustrates. Energy stocks, for all their success in recent years, are only slightly better than middling on this scale. Meanwhile, the materials sector is valued slightly by investors, as it often has been in recent years.

The fact that financials remain the biggest slice of the market cap pie raises a few questions. One is whether that leadership position means that the mighty still have plenty of room to fall? On the other hand, financials have long dominated the S&P’s market cap. Has that been a sign of Mr. Market’s wisdom all along? Or has the old boy finally overextended his hand? Questions, questions, always questions.