Last Updated on 20 April, 2023 by Samuelsson
A Market sector is a common term used in finance and economics. A market sector is a broader sector of an economy than an industry. Two closely linked industries may form a sector in the economy. In simpler words, a market sector is a collection of businesses that are engaged in buying and selling similar goods that are direct competitors of each other. Dividing the economy into market sectors allows an in-depth analysis of the economy as a whole.
What Are The Different Market Sectors?
When you are trading in the market, understanding the market sectors and their importance can make a difference for you and can increase your grip on the market matters. Global Industry Classification has categorized stock market sectors into 11 different categories. Let’s take a look at these:
- Energy: Coal, gas, oil, and fuel companies along with energy equipment and services altogether form the energy sector. This sector is closely based on the prices of crude oil.
- Basic Materials: This market sector consists of paper companies, chemicals, construction materials, metal and packaging materials. The businesses in this sector are involved in B to B dealings i.e. they provide products to other business concerns rather than directly to the consumer.
- Industrials: Many large-cap companies are part of this market sector. They are mostly involved in aerospace, defense, machinery, airlines, and manufacturing.
- Consumer Discretionary: This is the sector where the majority of money is spent by general consumers. This market sector includes hotels, cafes, apparels, retails, media and household related products.
- Consumer Staples: This sector includes beverages, food items and companies producing tobacco products. This is a resilient sector in the event of an economic downturn.
- Healthcare: Pharmaceuticals, healthcare equipment, and services make up this sector in the market. These companies are often a safe bet as they will continue to operate due to the continuous demand for medical care.
- Financial: Real estate companies, banks, insurance companies, and other financial institutions and bodies comprise the financial sector. This is closely related to the interest rates of the market.
- Information Technology: This is one of the most dynamic market sectors in terms of development and advancements. This includes internet and software related business along with the semi-conductor industry.
- Communications: this is the sector that is responsible for connecting people in terms of communications. The major part of this sector is dependent on established revenue lines while others earn their revenue from the advertising means.
- Utilities: the businesses in this sector have little to no competition. They are your gas, electric and water utilities.
- Real Estate: this sector is made from real estate developers and various real estate investment trust.
What Are They 4 Sectors of the Economy?
Commonly the economy is divided into a four sectors model. These are:
- Primary Sector: The primary sector, also known as the extraction sector is involved in raw materials.
- Secondary/ Manufacturing Sector: This sector takes raw material from the primary sector and turns it into finished products.
- Tertiary/ Service Sector: Intangible offerings to businesses and consumers
- Quaternary/ Knowledge Sector: The knowledge sector represents the intellectual side of the economy and is involved in the training and development of processes.