The Bullish Bears break down a list of the 11 stock market sectors. Sectors are the umbrella of industries and sub-industries, which contain the stock symbols and companies that traders and investors buy and sell. Sectors fall under the umbrella of indexes, which falls under the bigger umbrella of stock exchanges. Investors or traders cannot buy the major exchanges buy they can the indexes through ETFs and futures.
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Hierarchy:
Just click any of the links to get an overview of each sector and see the stock symbols and companies included.
List of 11 Stock Market Sectors
- Information Technology – $XLK
- Healthcare – $XLV
- Energy – $XLE
- Real Estate – $VNQ
- Financial – $XLF
- Basic Materials – $XLB
- Utilities – $XLU
- Industrials – $XLI
- Consumer Staples – $XLP
- Consumer Discretionary – $XLY
- Communications – $XTL
When the market is booming, sectors can be overlooked. However, when corrections come knowing which sectors are safe is an important part of protecting yourself. A stock sectors list can be broad. There are 11 different sectors in the stock market. Within each of those are sub-sectors.
Sectors allow stocks that have a lot in common to be grouped. As a result, you can compare them and see which stocks outperform others. How are the different stock sectors doing? How are the stocks in that sector fairing again each other? This information can be quite helpful to traders and investors looking to find a good play in a market that doesn’t have many.
What Sectors Do Well in a Recession?
- Energy
- Utilities
- Consumer Staples
Defensive and Cyclical Stock Sector Categories
We mentioned that there are 11 sectors in a stock market sectors list. However, you can break those 11 sectors into cyclical and defensive categories. Knowing what each category means can come in handy when the market is taking a downturn or an upturn. All sectors don’t run together. The market tug-of-war will influence each category and the different stock sectors.
The cyclical category is reactionary. In other words, these sectors react to market conditions. Hence, most of the stock sectors listed are in the cyclical category. The defensive category includes stocks that don’t experience loss in an economic downturn. As a result, they’re great stocks to add to any investment portfolio.
Just as sports require a good defensive strategy, trading is the same. You usually don’t have a winning offense without a good defense.
What would a stock sectors list be without an actual list? In 1999 a Global Industry Classification Standard was formed as a way to keep the stock market a bit organized. In fact, per Investopedia, more than 26,000 stocks worldwide have been classified by GICS, accounting for more than 95% of the world’s listed market capitalization.
As a result, that allows all traders or investors to classify stocks by regulated definitions. Each one of these sectors plays an important role in trading as well as investing.
Defensive Category
What sectors make up the defensive category, and why are they important?
- Utilities
- Consumer Staples
- Healthcare
These stocks generate a consistent income no matter the economic climate. We all need water, gas, and electricity. You have to pay your utility bill, or you will be in trouble. As a result, the utility company always sees an influx of income. Consumer staples are food and beverage companies.
Just like with utilities, we all need food and drink. So even if the economy weakens, we’ll buy food and beverages. We still have to eat. And unfortunately, we all still get sick regardless of what the economy is doing, so this is why healthcare is in the defensive category. This is why the defensive category of the stock sectors list always generates an income. It’s why it’s an important category to invest in and keep an eye on in bearish times.
Cyclical Category
What sectors make up the defensive category, and why are they important?
- Energy
- Financial
- Information Technology
- Basic Materials
- Industrials
- Consumer Discretionary
- Communications
- Real Estate
The cyclical category makes up the other sectors. These sectors react to what the market does. Which means they can get pretty volatile. For example, let’s take a look at the financial sector. Banks, investment funds, and insurance companies make up the financial sector. These react to their environment. Look what happens if an interest rate hike is threatened or happens. The sector goes crazy.
The consumer discretionary and real estate sectors need a booming economy to be profitable. Why? They make money when people are spending money. People aren’t going to go and buy homes if they have to tighten their belts.
Clothing companies, media companies, and retailers make up the discretionary sector. You’re not going out shopping when you have to save money. Hence why these companies need a booming economy to perform.
The same can be said for the IT and communications sector. The IT sector is made up of software developers and electronics companies. You will not buy the latest electronics if you can’t afford them.
The same can be said with telecom companies. What’s one of the first things to go when you cut back? Cable. Internet companies will always be a strong sub-sector because the internet has become necessary. As a result, those companies will usually generate income.
Industrial
The industrial and materials stock sectors list consists of construction, manufacturing, mining, and refining. They’re reactionary to their environments and susceptible to change.
Energy and healthcare are the last 2 of the stock sectors listed in the cyclical category. The energy sector is made up of oil and gas. They rely on crude oil, natural gas, and other commodities.
The biotech sector could technically be defensive because people will always need healthcare. However, with the inclusion of biotech, there’s always room for growth.
As an easy rule of thumb, defensive companies usually pay higher dividends on their stock than cyclical companies.