How to invest in one of the hottest stock market sectors while cutting your risk
By Philip van Doorn
Also, expectations for AI companies amid fierce competition, Warren Buffett's second favorite country for investment and useful Social Security details.
Here's a summary of how the 11 sectors of the S&P 500 have performed his year and how forward price-to-earnings ratios compare to valuation levels at the end of 2021:
Sector or index 2023 return 2022 return Return since end of 2021 3-year return 5 year return Forward P/E Forward P/E at end of 2021 Communications Services 32.0% -39.9% -21% 22% 55% 16.8 20.9 Information Technology 28.2% -28.2% -8% 70% 143% 25.1 28.1 Consumer Discretionary 19.4% -37.0% -25% 26% 51% 25.2 34.2 Consumer Staples 2.4% -0.6% 2% 44% 79% 20.5 21.4 Industrials 2.3% -5.5% -3% 66% 46% 18.0 21.4 Materials 1.4% -12.3% -11% 56% 46% 16.5 16.6 Real Estate -1.1% -26.1% -27% 23% 41% 16.8 25.3 Healthcare -3.4% -2.0% -5% 36% 72% 17.3 17.2 Financials -3.8% -10.5% -14% 57% 31% 12.7 16.1 Utilities -5.4% 1.6% -4% 28% 59% 17.3 20.4 Energy -8.6% 65.7% 51% 136% 31% 10.1 11.1 S&P 500 SPX 10.1% -18.1% -10% 49% 69% 18.2 21.5 Dow Jones Industrial Average DJIA 2.0% -6.9% -5% 0% 0% 16.8 18.9 Nasdaq Composite Index COMP 21.7% -32.5% -18% 41% 80% 26.2 32.1 Source: FactSet
The communications services sector has been this year's best performer, but technology stocks have really been in the lead.
Two tech giants -- Alphabet (GOOGL) and Meta Platforms (META) -- are in the communications sector, while Amazon.com (AMZN) is in the consumer discretionary sector, which has also been staging a comeback following a dismal 2022. For perspective, returns from the end of 2021 are shown. Meanwhile, forward price-to-earnings ratios, based on estimates among analysts polled by FactSet, are considerably lower for most sectors than they were at the end of 2021. But stocks cannot be said to be cheaply valued in general. The S&P 500's current forward P/E of 18.2 compares to a 20-year average of 15.7.
Another tech-oriented name that has soared this year is Tesla (TSLA), which is part of the consumer discretionary sector. The stock has risen 47% in 2023, following last year's 65% drop.
In this week's ETF Wrap, Christine Idzelis looks at several ways to make broad investments in the electric-vehicle space, as well as the semiconductor industry and tech in general.
Here's a fascinating fact from Joseph Adinolfi: Apple is now worth more than the entire Russell 2000 Index. Apple's (AAPL) stock has returned 35% this year, while the Russell 2000 is up only 2%.
Tech company news:
More about Tesla, Musk and EV competition
Tesla had its annual meeting on Tuesday and there was some (apparently) good news for people who have been waiting years for the Cybertruck. Here are four other takeaways from Tesla's annual meeting, from Claudia Assis.
AI sets the stage for competition
We are at the start of what may be a long period of innovation and improved services from expanding use of artificial intelligence. Here is a broad screen of global stocks highlighting the 20 AI-oriented companies expected to increase sales most rapidly through 2025.
And here is a look at which of the largest AI players might win the race, according to analysts at Morgan Stanley.
Is it too late to invest in Warren Buffett's second favorite country?
Companies in Japan make up more of Berkshire Hathaway's (BRKA) portfolio of stocks than those of any country except for the U.S. Japanese stocks have staged a strong rally this year. Berkshire CEO Warren Buffett recently visited Japan. Now William Watts considers whether or not it is too late to jump aboard the Japan bandwagon.
More on markets:
How about some mild winters for a change?
Jessica Hall writes the Where Should I Retire? column. This week she helps a a couple who wish to become snowbirds, living during the winter in a pleasant climate, but away from big cities while still near a major airport. Here are two suggestions from the MarketWatch retirement locations tool, which you can use to make your own custom search.
Here's what happens if you continue working while collecting Social Security
Alessandra Malito writes the Help Me Retire column. This week she helps a reader who might begin taking Social Security even though he is still working. Here's how his wages and investment income can affect his Social Security payments.
More about retirement planning:'It's like getting married on the first date.' How can you trust financial planning if you don't know exactly what you're paying and what you're getting?
Retailers begin to report and the word is... mixed
Home Depot (HD) has been a consistent performer for many years, showing continual increase in comparable-store sales. But now that has changed -- the company reported a 4.5% decline in comparable-store sales, for its worst performance by this measure since 2009. Here's what the company expects for its full fiscal year.
Target (TGT) reported an increase in comparable-store sales, but also lowered its earnings guidance, citing "softening sales trends."
On a more positive note, TJX (TJX) reported a 3% increase in comparable-store sales.
More news about retailers:
A survey of the U.S. housing market
Aarthi Swaminathan explains why people are staying put.
Read on:Can California be viable for someone who is single and earns $60,000 a year?
Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.
-Philip van Doorn
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 20, 2023 13:09 ET (17:09 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.