Including sector investments in portfolio management

Sector investing offers investors a strategic approach to gaining exposure to distinctive segments of the economy. Using sector indexes derived from the MSCI US Investable Market 2500 Index, which represents the investment opportunities available to US domestic investors, we examined sector investing in the US over the past two decades.

As sectors differ in terms of economic, thematic and factor exposure, as well as sustainability and climate profile, degree of concentration and fundamental characteristics, their performance behavior varied as macroeconomic conditions changed.

We found that over the past two decades ending in May 2024, most U.S. sectors had low correlation with performance, suggesting that investors may have built portfolios using sector rotation strategies to potentially improve performance or combined less correlated sectors to reduce portfolio risk.

US sector active returns for the calendar year

Data period from December 31, 2003 to December 29, 2023. The chart shows the calendar-year active returns of the US sector indexes compared to the returns of the MSCI US Investable Market 2500 Index. Refunds are gross in USD.