Glossary · Defined term
Sector
A sector is a grouping of companies by business type, like technology or energy; the GICS standard defines 11 of them.
Last updated Oct 2, 2026
What it means
A sector is a grouping of companies with similar business activities, such as technology, healthcare, energy, or financials. The Global Industry Classification Standard, or GICS, divides the market into 11 sectors, and most market data, funds, and analysis are organized along these lines. Sectors let investors compare a company against its true peers instead of the whole market.
Sectors move with different rhythms through the economic cycle, which is the basis of sector rotation strategies. Energy and materials tend to lead when commodity prices surge, consumer staples and healthcare hold up best in downturns, and technology shines when growth is strong and rates are low. Economic data therefore reads differently depending on which sector you watch.
For portfolio construction, sectors are a diversification tool. Owning stocks across many sectors protects against a slump in any single industry, while sector ETFs let investors express a view on an entire industry without picking individual winners.
An example
For illustration, when oil prices spike, the energy sector rallies on fatter producer profits while airlines and trucking companies suffer from higher fuel costs. The same commodity move is good news for one sector and bad news for another.