The S&P 500 is the most typically used benchmark to monitor performance of professional pms managing money invested in US stocks. The two chief alternatives are the NASDAQ, which has a stronger emphasis on technology than mainstream institutional clients might like, and the Dow Industrials, which has great retail name recognition but whose small size and eccentric method of calculating performance make it pretty much useless.
The S&P breaks out into 11 sectors. In descending order (as of 12/31/24), they are:
Information technology 32.5% of the index
Financials 13.6%
Consumer discretionary 11.3%
Healthcare 10.1%
Communication services 9.4%
Industrials 8.2%
Staples 5.5%
Energy 3.2%
Utilities 2.3%
Real estate 2.1%
Materials 1.9%.
grouping these by their sensitivity to the ups and downs of the economy (primarily the US but with a nod to overall world growth), from the most sensitive to the least:
most sensitive = 26.6%
Materials
Energy
Industrials
Consumer discretionary
Real estate
sensitive, but strong secular growth = 41.9%
Information technology
Communication services
less sensitive/more defensive = 31.5%
Financials
Staples
Utilities
Healthcare.
The index itself is also a tool that pms use to control their portfolio structure and to monitor how their ideas are working out.
There are many ways of doing this. They all involve intentional deviation from the structure of the index. At the most abstract level, one can shift sector weightings, based on high-level thoughts about how the world economy will likely play out. Same with industry and individual stock weightings. Or one can substitute names that are not in the index for part/all of names that are.