What are the 11 stock market sectors?

GICS has four levels: 11 sectors, 25 industry groups, 74 industries and 163 sub-industries. The sectors, in GICS order, with the kind of companies in each:

  • Energy: oil and gas producers, refiners, equipment and services.
  • Materials: chemicals, metals and mining, construction materials, packaging.
  • Industrials: aerospace and defense, machinery, airlines, railroads, business services.
  • Consumer Discretionary: cars, non-essential retail, hotels, restaurants, leisure.
  • Consumer Staples: food, beverages, household products and everyday retailers.
  • Health Care: drug makers, biotech, medical devices, health insurers and providers.
  • Financials: banks, insurers, asset managers, exchanges and, since 2023, payment companies.
  • Information Technology: software, semiconductors, hardware and IT services.
  • Communication Services: telecom, media, entertainment and interactive media such as search and social networks.
  • Utilities: electric, gas and water utilities and power producers.
  • Real Estate: real estate investment trusts (REITs) and property developers and managers.

Cyclical vs defensive sectors: what’s the difference?

Cyclical sectors sell things people and businesses can postpone, so their sales and profits rise strongly in expansions and fall hard in recessions: consumer discretionary, industrials, materials, financials and energy are the usual examples. Defensive sectors sell what people keep buying in bad times, like food, medicine and electricity: consumer staples, health care and utilities.

Technology and communication services are often grouped with growth rather than either label, and real estate is especially sensitive to interest rates. The labels are rules of thumb: a defensive sector can still fall in a bear market, often by less, and a single company can behave very differently from its sector. The classification itself also changes: the 2023 review moved payment companies such as Visa and Mastercard from Information Technology to Financials.

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A hand-drawn illustrative chart of sales and profits through expansion, a grey recession band and recovery: a solid line for cyclical sectors climbs high, plunges in the recession and rebounds (big swings), while a dashed green line for defensive sectors (staples, health care, utilities) moves far less.

How to invest in a sector: sector ETFs

The simplest way to buy a whole sector is a sector ETF. The best-known US family, the Select Sector SPDR funds, has one fund for each of the 11 sectors, each holding the S&P 500 companies of that sector: XLK for technology, XLF for financials, XLE for energy, XLV for health care and XLU for utilities, for example. Other issuers offer sector funds that also hold smaller companies.

Check two things before buying. Concentration: many sector funds are weighted by market value, so a few giant companies can make up a large share of the fund. Overlap: a broad index fund already holds every sector, so a sector ETF on top increases a bet you already have. See what is an ETF and portfolio diversification.

What is sector rotation?

Sector rotation is the idea that market leadership moves between sectors as the economy moves through its cycle. A common textbook version, drawn below, links early recovery with financials and consumer discretionary, expansion with technology and industrials, the late cycle with energy and materials, and recession with staples, health care and utilities.

Treat it as a simplified model, not a timing tool. Cycle phases are only clear afterwards, markets often move months before the economy does, and interest rates, oil shocks or a strong theme can override the script. Federal Reserve decisions and economic data set the backdrop; the economic calendar shows when they come out.

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A hand-drawn cycle of four boxes connected clockwise by arrows: early recovery (financials, consumer discretionary), expansion (technology, industrials), late cycle (energy, materials) and recession (staples, health care, utilities). A yellow note reads simplified textbook model, not a timing tool, with real cycles often break the pattern beneath it.

How to compare sectors with relative strength

Instead of guessing the cycle, many traders look at which sectors are actually leading. Divide a sector ETF by the S&P 500 and plot the ratio: when it rises, the sector is outperforming; when it falls, it is lagging, even if both are going up. On TradingView you can type a ratio such as XLK/SPY straight into the symbol search.

In the hypothetical drawing below, both sectors rose, but sector A rose more than the index and sector B less, so A’s ratio line climbs and B’s slides. Growth-stock methods apply the same idea to stocks: CAN SLIM prefers leaders in leading groups, and how to pick growth stocks checks a stock’s relative strength line. Leadership can change quickly; a rising ratio describes the past, not the future.

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Two hand-drawn panels. Top: performance from a start of 100 for sector A (green), the S&P 500 (dashed) and sector B (red); all three end higher, A the most and B the least. Bottom: relative strength lines, A ÷ SPY rising (the sector beats the index) and B ÷ SPY falling (it lags).