Stock Market Sectors: A Regional Breakdown Over Time
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The Regional Breakdown of Stock Market Sectors Over Time

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The following content is sponsored by MSCI

Regional Breakdown of Stock Market Sectors

A Regional Breakdown of Stock Market Sectors

Over the last decade, the composition of global stock market sectors has changed substantially. For example, the information technology sector’s weighting has nearly doubled while the energy sector’s weighting has shrunk by nearly three-quarters.

But which regions have gained or lost market share within the stock market sectors? In this graphic from MSCI, we show the regional breakdown of each sector in 2011 and 2021.

Regional Weights by Stock Market Sector

We’ve based our data on the MSCI ACWI Investable Market Index (IMI), a global equity index intended to represent the entire stock market.

Here is how regional weights by stock market sectors have changed in percentage point terms over the last decade. For example, emerging markets’ utility weighting shrunk from 0.5% to 0.3% of the global stock market, a decline of 0.2 percentage points.

 Emerging
Markets
North
America
Asia
Pacific
Europe, Middle East,
and Africa
Total
Utilities-0.2-0.1-0.3-0.5-1.0
Communication Services0.34.90.1-0.84.5
Materials-0.9-1.0-0.9-1.2-4.0
Industrials-0.40.7-0.6-0.3-0.7
Consumer Discretionary0.72.0-0.6-0.41.6
Consumer Staples-0.3-0.9-0.3-1.0-2.4
Health Care0.42.90.2-0.33.2
Financials-1.1-0.5-2.1-2.4-6.1
Information Technology0.88.2-0.20.79.5
Energy-1.2-4.8-0.3-2.0-8.2
Real Estate0.32.10.70.53.5

Financials shrunk the most in the Asia Pacific region and Europe, Middle East, and Africa (EMEA). The most dominant country in the Asia Pacific region, Japan has seen banking troubles due to shrinking populations and ultra-low interest rates that created razor thin profit margins. In EMEA, the UK’s financial services sector was hit hard when billions of dollars were moved out of London into new centers like Frankfurt after Brexit.

The energy sector, composed almost entirely of oil and gas companies, saw declines in all regions. Given that the U.S. is the biggest producer of crude oil and natural gas in the world, North America had the furthest to fall and experienced the largest drop.

On the other hand, North America saw the biggest increases in sectors like health care, real estate, and communication services. The latter is due to the telecommunications sector being broadened and renamed as the communication services sector in 2018. This newer sector reflects the way people share information and entertain themselves, and includes big U.S. names like Meta, Alphabet and Netflix.

A Different Perspective: Percentage Changes

By far the largest region in the global stock market, North America dominates the biggest changes in absolute terms. But what if we looked at things a different way?

We explored how region weights by stock market sectors have changed in percentage terms over the last decade for a more apples-to-apples comparison. For example, emerging markets’ utility weighting shrunk from 0.5% to 0.3%, a decline of nearly 42%.

 Emerging
Markets
North
America
Asia
Pacific
Europe, Middle East,
and Africa
Total
Utilities-41.7%-4.4%-56.1%-41.3%-27.1%
Communication Services32.0%381.3%20.2%-54.1%108.5%
Materials-43.2%-33.1%-53.7%-45.7%-42.6%
Industrials-35.1%13.2%-27.5%-8.9%-5.6%
Consumer Discretionary56.9%37.2%-31.2%-15.0%15.1%
Consumer Staples-28.4%-20.8%-30.6%-33.3%-26.7%
Health Care219.2%58.4%28.9%-12.9%37.7%
Financials-34.6%-6.7%-57.2%-48.1%-30.9%
Information Technology50.2%101.0%-13.7%77.3%81.2%
Energy-68.2%-72.0%-73.4%-75.2%-72.2%
Real Estate100.0%100.0%100.0%100.0%100.0%

Note: Real estate was part of the financials sector in 2011, and has since been split out into a distinct sector.

Using this view, the energy drops are similar across all regions. Investors are focusing on net-zero goals and reducing their exposure to fossil fuels, which has contributed to the sector’s decline.

Emerging markets have seen strong market share growth in the health care, consumer discretionary, and information technology sectors. Health care in particular has exploded, due to a variety of factors:

  • Rapid urbanization and rising income are fueling demand for health care services
  • Cases of non-communicable diseases such as diabetes and cancer are rising
  • Countries are beginning to increase health care spending after years of underinvestment

In the consumer discretionary and information technology sectors, emerging markets’ rising middle class has fueled demand for higher end items. This has led to the rise of eCommerce giants like Alibaba and Meituan in China, which are among the largest companies in the world.

Regional Shifts Within Stock Market Sectors

Investors are likely familiar with the shifts in overall sector weightings. However, this data sheds new light on which regions have become more or less dominant within stock market sectors.

North America increased its overall weighting, thanks in part to the ballooning market valuations of U.S. big tech companies. Relative to their starting weight, emerging markets have seen impressive growth in numerous sectors. On the other hand, Asia Pacific and EMEA have shrunk nearly across the board.

Investors looking to invest in international equity may want to be mindful of these trends within stock market sectors. As geopolitical dynamics and business environments shift, what will regional weightings look like in another 10 years?

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Retirement Spending: How Much Do Americans Plan to Spend Annually?

Retirement expenses can vary significantly from person to person. In this graphic, we show the range of expected retirement spending.

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Retirement Spending

Americans’ Expected Annual Retirement Spending

Planning for retirement can be a daunting task. How much money will you need? What will your retirement spending look like?

It varies from person to person, based on factors like your health, outstanding expenses, and desired lifestyle. One helpful trick is to break it down into how much you estimate you’ll spend each year.

In this graphic from Personal Capital, we show the expected annual retirement spending of Americans. It’s the last in a three-part series that explores Americans’ spending and savings.

The Range of Retirement Spending

To determine how much people expect to spend, we used anonymized data from users of Personal Capital’s retirement planning tool. It’s worth noting that these users are proactive regarding financial planning. They also have a median net worth of $829,000 compared to the $122,000 median net worth of the U.S. population overall.

Here is the range of expected annual retirement spending.

Expected Annual Retirement SpendingPercent of People
$10K1.3%
$20K3.3%
$30K7.5%
$40K9.8%
$50K5.2%
$60K12.7%
$70K10.2%
$80K6.4%
$90K9.1%
$100K5.4%
$110K1.5%
$120K9.7%
$130K1.5%
$140K2.8%
$150K2.2%
$160K0.9%
$170K0.4%
$180K2.7%
$190K0.7%
$200K0.8%
$210K0.5%
$220K0.2%
$230K0.1%
$240K1.6%
$250K0.3%
$260K0.2%
$270K0.1%
$280K0.1%
$290K0.1%
$300K0.7%
Over $300K2.1%

Users are a mix of single individuals and people in a relationship. In all cases, expected retirement spending is what the household expects to spend annually.

The most commonly-cited expected spending amount is $60,000. Interestingly, this is roughly in line with what Americans spend annually on their credit cards. This suggests that people may be using their current bills to help gauge their future retirement spending.

Median spending, or the middle value when spending is ordered from lowest to highest, falls at $70,000. However, average spending is a fair amount higher at $100,000. This is because the average is calculated by adding up all the expected retirement spending amounts and dividing by the total number of users. Higher expected spending amounts, some in excess of $300,000 per year, skew the average calculation upwards.

Of course, given their higher net worth, it’s perhaps not surprising that many Personal Capital users expect to spend larger amounts in retirement. How does this compare to the general population? According to the Bureau of Labor Statistics, Americans age 65 and older spend about $48,000 per year on average.

Chances of Retirement Success

Once you’ve determined how much you’ll spend in retirement, your next step may be to wonder if your savings are on track. Based on an assessment of Personal Capital retirement planner users, here is the breakdown of people’s chance of success.

Retirement Spending Chance of Success

The good news: more than half of people have an 80% or better chance of meeting their retirement spending goals. This means they have sufficient financial assets and are contributing enough, regularly enough, to meet their expected spending amount. The not so good news: one in five people has a less than 50% chance of meeting their goals.

This problem is even more troublesome in the overall U.S. population. Only 50% of people have a retirement account, and the Center for Retirement Research at Boston College estimates half of today’s workers are unprepared for retirement.

Setting Your Own Retirement Spending Goals

While seeing the goals of others is a starting point, your annual retirement spending will be very specific to you. Not sure where to start?

Financial planners typically recommend that you should plan on needing 70-80% of your pre-retirement income in retirement. This is because people generally no longer have certain expenses, such as commuting or childcare costs, when they retire. However, keep in mind your expenses could be higher if you still have a mortgage, encounter unforeseen medical expenses, or want to splurge on things like travel when you retire.

It requires some upfront planning, but being realistic about your retirement spending can give you confidence in your financial future.

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Navigating Market Volatility: Why ETFs Are Critical Tools

Historically, the trading volume of ETFs has spiked during market volatility. We explore why ETFs are preferred by institutional investors.

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ETFs During Market Volatility

Download the ETF Snapshot for free.

Why ETFs Are Critical Tools During Market Volatility

Investors experienced record-breaking volatility in 2020. During COVID-19 market turbulence, the CBOE Volatility index surpassed the previous peak seen in 2008.

In this infographic from iShares, we explore how ETFs rose in popularity during this time—and the characteristics that make them particularly useful during market volatility. It’s the first in a five-part series covering key insights from the ETF Snapshot, a comprehensive report on how institutional investors manage volatility.

The Methodology

To assess how institutional investors navigated this volatility, Institutional Investor published a report in 2021 based on a survey of 766 decision makers. Respondents were from various types of organizations, firm sizes, and regions.

For instance, here is how responses broke down by location:

  • 21% Asia Pacific
  • 36% North America
  • 29% Europe, Middle East and Africa
  • 14% Latin America

Here’s what the survey found.

Rebalancing During Market Volatility

In total, 90% of institutional investors said they rebalanced their portfolios between the first and third quarter of 2020. How did they do it?

Among all financial tools, ETFs were the most popular vehicle for rebalancing. For instance, ETFs were used by 70% of investors globally, compared to the 51% who used mutual funds or derivatives.

The popularity of ETFs was evident in market activity. From January to March 2020, ETFs as a proportion of total equity trading volume increased.

 January 2020February 2020March 2020
VIX142058
ETF trading volume$95B$136B$240B
ETF as % of equity volume26%27%36%

Based on an average of daily values. Reflects all listed U.S. ETFs across all asset classes.

This trend is true historically as well, as ETF trading volume has typically spiked during periods of volatility.

Want more institutional insights into ETFs?

Global Forecast 2022

Download The ETF Snapshot for free.

The Attributes Driving ETF Usage

Why are ETFs preferred by institutional investors? They offer three key characteristics:

  1. Liquidity: ETFs make it much simpler to buy and sell large portfolios instantly, instead of trading individual securities.
  2. Transparency: Among multi-asset managers, transparency of holdings is the top reason for using ETFs. A clear holdings breakdown helps these managers achieve exposures to particular asset classes, sectors, and styles.
  3. Efficiency: ETFs can be traded quickly. They typically also have lower transaction costs relative to the underlying basket of securities.

Based on these key benefits, ETFs were an invaluable tool during extreme market volatility.

Growing Momentum

ETFs are also poised to help institutional investors navigate the market going forward. Globally, 65% of institutional investors plan to increase their use of ETFs in the future.

In fact, this is already coming to fruition. As of September 2021, the average daily trading volume of ETFs was up more than 5% compared to 2020.

Evidently, ETFs play a critical part in helping institutional investors achieve their goals.

Download the ETF snapshot for free.

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