The S&P 500 Index has a high concentration in the technology sector, currently at around 31.5% or 41.2% with technology-related stocks included. However, recent moves by S&P Dow Jones Indices have seen some stocks, like EA and V, being moved out of the technology sector. Despite the strong performance of the technology sector year to date, financial stocks have outpaced it in terms of returns. In the current quarter, the energy and industrial sectors are also outperforming technology. The benefits of concentration can be seen when returns are strong, but rotation to other sectors can lead to a decline in performance for the previously leading sector, like technology in this case.
It is important for investors to evaluate the technology sector weighting in the S&P 500 Index compared to that in their overall portfolio. The movement of stocks in and out of sectors by index providers can have a significant impact on sector weightings and performance. Investors should consider diversifying their portfolios to mitigate risk and take advantage of opportunities in different sectors.
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