US Communications Services Industry Celebrates Its First Anniversary
The large-scale reclassification of three sectors under the Global Industry Classification Standard (GICS) in September 2018 resulted in a significant rebalancing of the core S&P 500 index, the launch of new funds, and an increase in investment activity.
The changes to the S&P took place on September 24, 2018, and the most important of them was to reclassify the former telecommunications services sector to that of communication services. The new industry brought together well-known and dominant interactive media assets, entertainment providers, and large telecommunications companies.
More defensive. The start of the year has not been easy. The communications services sector fell faster than the market average during the correction in the last quarter of 2018, as investors shied away from tech companies and bet on relative safety through stocks, bonds, or cash.
Fears of political interference in the most prominent companies have somewhat held back the industry. However, from the start of 2019 to the end of April, the sector rebounded on expectations of attractive income growth. Still, it is now showing new momentum, gaining 24.4% since the start of the year (compared to an increase of 20.9% of the market).
The top-performing stock has been Twitter, with returns of 50% based on increased user count. While investors’ eyes have been on high-profile blue chips like Facebook and Alphabet, they have also made a significant contribution to the performance of the AT&T sector – whose listing was driven by the interest of an activist investor. – and Walt Disney – who were enthusiastic about the idea of investors after announcing a new streaming platform -. Both stocks contributed about 25% of the total sector movement in the index.
When the launch took place, there were doubts about how this combination of sub-sectors would work, and SPDR argued that the sample was attractive – the results corroborate this view.
Alphabet is under investigation in the United States over fears that Google is monopolistic in its advertising activities. The efforts of politicians and regulators could end up hurting Facebook, which faces its legal battles over privacy.
A result of this could be the disintegration of companies. However, these moves could take years and face significant legal challenges. However, a failure does not have to be damaging to shareholders.
Communication services are probably never dull. The industry comprises an exciting mix of communication and content for media, social networks, entertainment, and video games. This positioning means that companies will almost always offer rapid sales growth, a strong news feed, and a focus on FAANGs.
The increase in digital advertising can also be a driver for the industry, as the big players in social media generate platforms that reach massive audiences globally. Acquiring the sector gives access to all of these topics without picking the winner or stay highly exposed to the idiosyncratic risks of individual stocks.
The information presented here does not constitute any investment advice within the meaning of the Markets in Financial Instruments Directive (2014/65 / EU) or the applicable Swiss regulations. It should not be used for this purpose. It should also not be interpreted as an invitation to buy or an offer to sell investments. This information does not consider the objectives, strategies, tax status, risk appetite. Or outlook of any client or potential client regarding their investments. If you need investment advice, you should consult your tax, financial, or other professional advisors. All material has remained obtained from sources believed to be reliable.
Exchange-Traded Funds (ETFs) work like stocks are subject to investment risk, and their market value fluctuates. The investment value can both go up and down, so the return on investment will be variable. Changes in exchange rates can adversely affect the value, price, or profitability of an investment. In addition, there can remain no assurance that a listed fund will achieve its investment objective.
The views conveyed here are those of the SPDR EMEA ETF strategic team. And are subject to change depending on the market and other conditions. This document contains certain forward-looking statements. Please note that none of these statements guarantee particular future performance. And that actual results or events may differ from those projected in this document.
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