Amazon.com, whose market capitalization of more than $250 billion makes it the biggest in the 85-stock consumer discretionary group, has accounted for more than one-third of the move in that sector this year -- as long as your index is market-weighted, Bloomberg data show. The stock is up 72 percent in 2015.
The S&P 500 consumer discretionary index is up 11 percent this year, compared with 3.6 percent for an equal-weighted version. The consumer gauge added 0.3 percent at 10:11 a.m. in New York, while the equal-weighted index slid 0.8 percent.
The same is true in technology. The S&P 500 Information Technology Index is up 2.4 percent in 2015 compared with 0.2 percent for its equal-weighted rival.
The most recent quarterly reports for Apple, Google and Facebook saw double-digit profit expansion. Meanwhile, the full S&P 500 is forecast to see earnings fall 2.8 percent this quarter. The divergence is prompting investors to be more selective when picking stocks, according to John Carey of Pioneer Investment Management Inc.
Earnings Growth
“The spotlight has been on those very large companies that seem to have an edge in terms of future earnings growth,” Carey, a Boston-based fund manager at Pioneer, which oversees about $230 billion, said by phone.
There’s nothing inherently wrong with smart beta, which also goes by the name fundamental indexing, according to Ferri of Portfolio Solutions. It’s just not a quick fix, with higher fees that make it expensive to shuttle in and out.
“These smart-beta strategies, if you’re going to use them, are a lifelong commitment,” Ferri said. “You’re going to have periods of underperformance like this. If you’re not going to stick it out, don’t do it in the first place.”