REORGANISATION: Some of the largest tech and consumer stocks will be changing sectors in a big GICS reorganisation of global equity sectors. This happens at the close of Friday, March 17. It will particularly impact much of the $10 trillion global ETF industry. It is meant to better align what companies actually do, with the sectors they sit in. 38 stocks in the S&P 500 will be moving, for example. The biggest US sector, tech, will shrink significantly and get even more concentrated. Whilst 3rd largest financials sector will get 20% bigger (see chart). This all shows the difficulty in classifying many stocks, which has helped drive growth in thematic investing.
IMPACTS: The biggest changes are that payment processor giants Visa (V) and Mastercard (MA) leave the IT (XLK) sector, along with PayPal (PYPL), to join Financials (XLF). They will be the 3rd and 4th largest stocks, after Berkshire (BRK) and JP Morgan (JPM). Their leaving will make IT more concentrated. Apple (AAPL) and Microsoft (MSFT) already make up 40% of the sector. Data processor Automatic Data (ADP) moves to be the 9th largest stock in Industrials (XLI), ahead of General Electric (GE). Whilst Target (TGT) moves from consumer discretionary (XLY) to become 9th largest in staples (XLP), along with Dollar General (DG) and Dollar Tree (DLTR). There are no Real Estate (XLRE) additions but it does see new industry granularity.
WHAT IS ‘GICS’ ?: The Global Industry Classification Standard (GICS) classifies 44,000 global companies into a hierarchy of sectors, industries, and sub-industries. It is managed jointly by the two largest index providers, MSCI and S&P. This is only its 3rd big change since launch in 1999. It comes after creating the real estate sector in 2016, and the communications sector in 2018.
All data, figures & charts are valid as of 06/03/2023