Summary

When it comes to investing in sectors of the S&P 500, we think it makes sense to focus primarily on a few key groups that can actually make a difference in terms of earnings and portfolio performance. As an example, the Real Estate sector accounts for about 2% of S&P 500 capitalization, but contributed only 1% of S&P 500 EPS during the recently completed 1Q25 EPS period, and its earnings declined 7% year over year. The Materials is another 2% market weight that generates a thin 2% of total earnings. We don't think clients should be spending a lot of time on deep dives trying to get these sectors right. The groups that really make a difference are going to be Information Technology, which accounted for 27% of the S&P 500 earnings and which grew earnings 18% year over year; and Financial, Healthcare, and Communication Services, which accounted for 18%, 12%, and 11%, respectively. Not surprisingly, these are three innovative market sectors in which the United States enjoys competitive advan