Divide and Conquer: Defining The Stock Market Sectors


Divide and Conquer: Defining The Stock Market Sectors


Chances are, 90% of the girl world has “Mean Girls” listed as one of their favorite movies. There’s probably no other movie that can measure up to the number of notable lines remembered up to this day by anyone, ever! Tina Fey, you are a genius!

Before we get carried away, the point here is that, in the movie, high school students were classified based on their clique; the people who they hang out with in school. Rebel-punk Janis Ian schooled newcomer Cady Heron to get to know what these cliques are – Jocks, Band Geeks, Cool Asians, Nerd Asians, Skinny Girls, Girls Who Eat Their Feelings, The Plastics, and so on – to avoid trouble in the cafeteria. Turns out, newbies in school should know what these stereotypes are to help them get through high school peacefully.

Businesses also have their “cliques”, so to speak. These are called the market sectors. In this article, we get to know them one by one.

What is a sector?

First things first. A sector is an area of the economy where businesses share the same characteristics or offer related products or services. The economy is divided into sectors to allow a more detailed and in-depth analysis of market performance and the overall state of the economy. Think of the economy as your high school and the market sectors as the different cliques in school.

For example, let’s say the economy is doing well this year. However, when individual market sectors are analyzed, turns out that some of these sectors are not doing so well, while others are really having a good year. This information can provide insight to the public about sectors that do well in a certain state of the economy or [business cycle], and those that do not. Just like Cady Heron, it is essential to have an understanding of these sectors, as an investor, to guide your investing decision-making.

What are the major stock market sectors?

Consumer Discretionary – As the term suggests, the consumer discretionary sector comprises of companies that sell non-essential goods and services. Examples include automotive, leisure equipment, apparel, hotels, restaurants and media production.

Consumer Staples – Simply put, these are the “must-haves”. These are the items consumers just could not scratch off their budget regardless of their financial situation. Consumer staples are always in demand no matter how the economy is doing. Examples include food, beverages, drugs and basic household products.

Energy – Pretty self-explanatory, actually. This sector comprises of businesses that produce and/or supply energy. Examples include oil, gas, power, fuel and petroleum companies.
Financial – This sector is made up of companies that provide financial services such as banks, insurance companies, financial institutions, brokerage firms and the like.

Health Care – Also known as medical sector. The health care sector is composed of businesses offering medical-related goods and services such as hospitals, health maintenance organizations (HMO) and the like.

Cost of health care
Industrial – The industrial sector refers to businesses that produce goods to be used in manufacturing or construction. Companies included in the sector produce items such as cement, industrial machinery, aerospace and defense items, lumber and metals.

– All tech stuff-related goods and services such as software and computers, Internet, systems, databases, electronic equipment – you get the picture – belong to the technology sector.

Materials – All of the products we consume are made up of something. Of course, everything’s gotta start from something, right? For instance, our televisions have wires. These wires come from companies that produce and supply them to companies like Sharp, Panasonic and Samsung. The companies that discover and develop these raw materials make up the materials sector.

Telecommunication Services – In this modern world, we almost can’t live without the means to communication through our phones, tablets and other devices. The companies that make up the telecommunication services industry make these, and more, possible for us. These companies create the platform and infrastructure to allow our messages to pass through anywhere in the world. Without these guys, we’d be practically doing snail mail until today!
Utilities – Sure, having a house is nice but what would you do with it without electricity, water and gas? The utilities sector has got us covered for that. This sector is made up of companies that distribute electricity, water and gas to consumers like us.