Daily Spotlight: Not All Sectors Are Equal

Summary

When it comes to investing in sectors of the S&P 500, we think it makes sense to focus on the few key groups that can actually make a difference in terms of earnings and portfolio performance. As an example, the Real Estate sector, which accounts for about 2% of S&P 500 capitalization, contributed only 1% of S&P 500 EPS during the recently completed 4Q EPS period. The Materials is another 2% market weight that generates a thin 2% of total earnings. While both of these sectors are forecast to generate double-digit growth in 1Q26, we don’t think that clients should be spending a lot of time on them, given the sectors low weights in the index. The groups that really make a difference include Information Technology, which accounted for 32% of the last quarter’s S&P 500 earnings (and where earnings are expected to grow 43% year over year). Financial is another likely sector winner, as it kicked in 18% of 4Q S&P 500 profits, growing at a 19% clip. The Industrial group should deliver a solid performance, with earnings expected to increase at a high-single-digit pace. We note that

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