IT Again Largest Sector – But This Time They Didn’t Earn It

Information Technology yesterday closed representing 16.26% of the S&P 500 market value, overtaking the Financials, which are at 16.19%, an event last seen in early 2002. Energy, at 14.89%, is at an all time high for the GICS sectors (1989). At the close of 1997 Financials were in first place, representing 17.21%, with IT just surpassing Consumer Staples for second place, representing 12.29%.

By the height of the Bull market on March 24, 2000, IT, after a 77.6% gain in 1998 and a 78.4% gain in 1999, climbed to 34.51% of the index, with Financials in second place, representing 12.86%.

At the bottom of the Bear market, October 9, 2002, after ITs 72.7% three-year drop, IT had again exchanged places with Financials, which represented 19.53% and IT 12.79%. The markets decline from the October 9, 2007 all time high, resulted in a 29.11% decline for the Financials, compared to a much lower 8.74% decline for IT. The S&P 500 was down 9.70% and Energy was up 14.54%.

The end result is that IT is the largest sector in the index, and Energy, that now accounts for a quarter of the operating earnings is at an all time high for the GICS sectors(1989; but on a proforma basis was closer to 30% in 1980).

In Y2K IT issues earned their way into top place (although their true earnings turned out to be a different story). In Y2K8, the 29% Financial drop gave it to them.

FYI - While the 2009 Financial sector P/E is 9.9 (IT is 15.6), the 12-month March P/E is 29.3 (IT 21.7).

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