Banks lose rank in S&P 500
One measure of the collapse of shares of banks and other financial companies is the sector’s shrinking importance in the benchmark Standard & Poor’s 500 index.
At the stock market’s all-time high of Oct. 9, 2007, financial stocks accounted for 20.1% of the market value of the S&P; -- the largest share of any of the index’s 10 major industry sectors.
From the stock market’s perspective, finance then was the most important business in America.
At the end of trading Thursday, the financials made up just 10.1% of the S&P.;
On Tuesday, amid another blistering sell-off in bank stocks, the sector’s share of the index briefly fell to 9.6% -- the first time its weighting was in single digits since 1992, according to S&P.;
Other industry sectors have gained stature in the S&P; as the financials’ weighting has withered. The healthcare sector, for example, now is 15.8% of the index, up from 11.6% in October 2007.
The energy sector’s weighting has risen to 13.9% from 11.6%.
The industry with the largest weighting in the S&P; is technology, at 16.1%. That’s the same weighting it had in October 2007, which tells you that tech stocks’ decline since the market peak is about in line with what the index as a whole has lost, while financials have fared far worse.
Tech, of course, had its own comeuppance early this decade: At the peak of the tech-stock bubble in March 2000, the sector accounted for a whopping 34.5% of the S&P; index.
That was slashed to just 12.8% by the bottom of the 2000-02 bear market, in October 2002.
If the financial sector were to shrink by the same proportion from October 2007, its representation in the S&P; would fall to 7.4%.
From the stock market’s point of view, that would make finance the seventh-most-important industry in the U.S. -- ahead of only basic materials (commodities), telecom and utilities.
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