Investors in the S&P 500 Index should be cautious of the high concentration of technology stocks, which make up 31.5% of the index and 41.2% if including some stocks moved out of the sector in 2018. While technology has been a winning sector so far this year, financial stocks have outperformed it. Energy and industrial sectors are also outpacing technology in the current quarter. Concentration in one sector can benefit investors if returns are high, but rotating to other sectors may come at the expense of the previous leader, such as technology in this case. It is important for investors to evaluate sector weightings in the S&P 500 Index compared to their overall portfolio. Several stocks were recently moved out of the technology sector, including Electronic Arts, Take Two, Visa, Mastercard, and Automatic Data Processing. Overall, investors should be mindful of sector concentration in the index and be prepared for potential sector rotations.
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