By Jeff Reeves, MarketWatch
In 2017, many money managers have chased outperformance by overreliance on high-flying tech names. “Hedge funds have 25% net exposure to Tech while large-cap core and growth mutual funds have 22% and 37% allocations, respectively,” noted Goldman Sachs in a note to clients.
And no wonder, with picks like Apple /zigman2/quotes/202934861/composite AAPL -1.74% and Facebook both up over 30% this year through Tuesday morning, while the broader S&P 500, which has a 23.2% weighting in tech, is up a far more modest 8.7%.
But will that trend continue over the coming months, particularly after an ominous downgrade to Apple stock this week?
And for those of us who aren’t active traders and looking for long-term returns with a diversified portfolio, what the heck is going on in the other 10 market sectors? Here’s a big-picture look at what’s driving the market outside the hot tech stocks:
Health care: Up 13% YTD
Health-care stocks are the second-biggest share of the S&P 500, making up 13.9% of the index. And while the tech sector’s surge gets the most attention, investors shouldn’t overlook this sector’s outperformance in 2017; the Vanguard Health Care ETF /zigman2/quotes/207621102/composite VHT -0.96% is up 13% year-to-date. While there is still uncertainty about the prospect of health-care reforms in Washington, earnings growth in biotech stocks and the combination of stability and income in the megacaps has kept this sector in favor.
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•Johnson & Johnson /zigman2/quotes/201724570/composite JNJ -0.65% , with $350 billion market capitalization, up 13.7% year to date
•Pfizer /zigman2/quotes/202877789/composite PFE -1.46% , $190 billion market cap, down 0.7%
•Merck & Co. /zigman2/quotes/209956077/composite MRK -0.19% , $180 billion market cap, up 10.3%
•UnitedHealth Group /zigman2/quotes/210453738/composite UNH -0.11% , $170 billion market cap, up 12.4%
•Amgen /zigman2/quotes/209157011/composite AMGN -0.74% , $120 billion market cap, up 9.9%
Financials: Up 0.1% YTD
Financials are closely behind health care with a 13.7% weighting in the S&P, but the sector hasn’t delivered consistent returns. After a big run-up after Election Day on the hopes of less regulatory red tape, stumbles with the Republican agenda in Washington have resulted in a 7.2% decline in the Vanguard Financials ETF /zigman2/quotes/204539969/composite VFH -1.68% since March 1. The sector has now given up almost all of the gains made earlier in the year.
•J.P. Morgan Chase /zigman2/quotes/205971034/composite JPM -2.51% , $290 billion market cap, down 4.1%
•Wells Fargo & Co. /zigman2/quotes/203790192/composite WFC -2.22% , $260 billion market cap, down 6.2%
•Bank of America /zigman2/quotes/200894270/composite BAC -2.76% , $220 billion market cap, up 0.6%
•Citigroup /zigman2/quotes/207741460/composite C -2.86% , $170 billion market cap, up 2.6%
Consumer discretionary: Up 12.1% YTD
Another big driver of the market is the consumer discretionary sector, which accounts for 12.5% of the S&P 500. Thanks to hopes of economic growth and tax cuts out of Washington, the sector has notched 12.1% gains in 2017 as measured by the Vanguard Consumer Discretionary ETF /zigman2/quotes/207717393/composite VCR -2.45% . While consumer confidence has been softer in recent weeks, it did notch a 16-year high in March to show that spending is very strong in 2017.
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•Amazon.com /zigman2/quotes/210331248/composite AMZN -2.50% , $490 billion market cap, up 35.4%
•Comcast /zigman2/quotes/209472081/composite CMCSA -2.37% , $200 billion market cap, up 21.0%
•Home Depot /zigman2/quotes/208081807/composite HD -0.69% , $190 billion market cap, up 15.1%
•Walt Disney /zigman2/quotes/203410047/composite DIS -2.41% , $170 billion market cap, up 1.6%
•McDonald’s /zigman2/quotes/203508018/composite MCD -0.82% , $130 billion market cap, up 25.1%
Industrials: Up 7.0% YTD
Making up about 10.2% of the S&P, industrials are a modest driver of market performance. As a group they are hard to pin down given the variety of companies in this sector. General hopes of a recovery have boosted subgroups such as home builders, while aerospace names have benefitted from talks of a bigger Defense Department budget. The net result is a 7.0% gain this year as measured by the Vanguard Industrials ETF /zigman2/quotes/210393217/composite VIS -1.44% .
•General Electric /zigman2/quotes/208495069/composite GE -1.44% , $240 billion market cap, down 11.5%
•3M /zigman2/quotes/205029460/composite MMM -1.62% , $120 billion market cap, up 15.3%
•Boeing /zigman2/quotes/208579720/composite BA -3.82% , $120 billion market cap, up 21%
•Honeywell International /zigman2/quotes/205583690/composite HON -1.58% , $100 billion market cap, up 15.0%
•United Technologies , $100 billion market cap, up 9.6%
Consumer staples: Up 9.7% YTD
Making up 9.4% of the S&P pie and often seen as sleepy defensive plays, staples don’t get much press in a “risk on” environment. But the sector is up 9.7% year-to-date as measured by the Vanguard Consumer Staples ETF /zigman2/quotes/204569793/composite VDC -1.34% . That’s partially because of some hard-fought growth for select names, but also because these stocks remain a haven for investors looking for less risk and bigger yields than they’ll find in the bond market.