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The S&P500 is known as the benchmark for US investment managers with respect to performance. The index comprises 500 leading companies in the US spread across a variety of industries with a focus on the large cap segment of the market. The S&P 500 is considered the proxy for performance measurement and a building block in portfolio construction. Breaking down the index into individual sectors, using the data available as of November 30, 2007, the largest concentrations were in the Financials (18.51%), Information Technology (16.30%), and Energy (11.86%) sectors while the smallest concentrations were in the Telecom Services (3.49%), Utilities (3.58%), and Materials (3.31%) sectors. The Energy sector is made up of various companies located in the coal, oil, and gas industries while the Materials sector comprised the precious metals, paper, chemicals, and mining industries. As a whole the Materials sector is still greatly underweight compared to other sectors, especially energy. In fact, if one drills down further to the individual stocks they find that the precious and hard metals area is represented by Titanium Metals Corp., Alcoa, Freeport-McMoran, and Newmont Mining. Newmont Mining is the only pure gold play in the S&P500. Silver investors should take heart in that there are no pure silver plays in the S&P500 making silver a wonderful hedge against a drop in the S&P500. In fact, gold makes up just 5.19% of the Materials sectors 3.31% weighting in the index or just 0.17% of the entire index. Silver lags at 0%. If we are truly entering a bear market in the US, gold and silver stocks are your safe haven. Not only are they an investor’s safe haven in times of a crisis but also as being unrepresented in the benchmark index for US stocks. In short, gold has a long way to run before it is overweight according to the S&P 500 and silver has yet to break out of the gate. Source: Standard and Poor’s website, S&P 500 GICS Sector Scorecard
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