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Communication Services: A New Economic Sector

In the fall of 2018 the biggest change in the history of GICS impacted the sector makeup and classification of the S&P 500 companies.

Dear Clients and Prospective Clients:

First, what is GICS? GICS stands for Global Industry Classification Standards and is a standardized classification system for equities developed jointly by MSCI and Standard and Poor’s.  Second, what are sectors? The stocks in an index such as the S&P 500 are divided into economic sectors and industry groups.  Examples of GICS economic sectors are Financials such as banks, and Information Technology which includes computer hardware companies like Apple.  

Keeping in mind the definitions for both GICS and Sectors, some significant changes have taken place in how stocks within the S&P 500 are classified.  GICS has created a new economic sector, Communication Services.  The smallest sector, Telecommunications (Telecom) has become part of the Communication Services sector.  You are all familiar with the old Telecom companies such as AT&T and Verizon.  Both companies along with other legacy Telecommunications companies are now part of the new sector.  In addition, approximately 24% of the S&P 500 Consumer Discretionary sector has been added to Communication Services, as well as 21% of S&P 500 Information Technology sector.  As a result Communication Services constitutes roughly 10% of the S&P 500.  

The bar charts below illustrate the sector makeup of both the S&P 500 and Curran Core Growth Equity before and after the changes took place.  The three sectors impacted are Consumer Discretionary, Information Technology and Telecommunication Services, which is now known as Communication Services.  Curran now has significant exposure to the new Communication Services sector whereas we had none with the old Telecommunication Services sector.  As a result it has reduced our exposure to both Consumer Discretionary and Information Technology.  A future notice will go into greater detail about the changes and offer the Investment Committee’s perspective.      

 To summarize:

  • GICS new (economic) sector; Communication Services
  • The elimination of the Telecommunications Services Sector
  • Communication Services Sector consists of what had been Telecom companies such as Verizon from the old Telecommunications sector as well as companies from both Consumer Discretionary and Information Technology

Feel free to contact your Curran Relationship Manager or Curran Wealth Management with any questions.    

Sincerely,

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Kevin T. Curran, CFA
President & Chief Investment Officer 

Please check with your Curran Wealth relationship manager,
or contact Curran Wealth Management if you have any questions.  
518.391.4200
info@curranllc.com

The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness. It is not, and should not be regarded as “investment advice” or construed as a “recommendation” or an offer to buy or sell a security.  CIM, LLC does not provide tax or legal advice.  No one connected with CIM, LLC can ensure tax consequences of any transaction.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.