2008 goes down as a year when those who talked-the-talk not only couldn't walk-the-walk, but stumbled flat on their faces.
If we can draw any lesson it's that we really don't know where the markets are heading - although it's safe the say the world is in the throws of a seismic shift. The time is right to step back and see where the planet is heading.
The economic monolith we've known as the United States of America has choked on its own excess. Wealth and power has not only been diminished but it is spreading to developing parts of the world hungry for a piece of capitalism pie.
Some multinational corporations that understand this reality are adapting to this change, and Standard & Poor's is taking notice through its Global Sector Indices. The 10 sector indices focus on 38,000 companies on more than 90 global exchanges that conduct their principal business activity on a global level and are traded as part of a broad global trend. Revenue is a key measure but earnings and "market perception" are also taken into account.
Over the past decade emerging economies such as India, China, Brazil and Russia have out-performed the developed world but the Indices are designed to adapt to the changing investment world. Companies, sectors, industry groups and sub-industries are reviewed at least once a year to see if they still meet S&P's global standard.
For investors wanting to get in on a changing world, Barclays offers a series of exchange traded funds (ETFs) on the New York Stock Exchange that track the S&P Global Sector Indices:
- iShares Global Consumer Discretionary ETF (RXI NY): Consumer discretionary stocks are issued by companies selling retail items that people want more than they need - such as media, automobiles and some retail. Top companies in the fund include Toyota Motor Corp., McDonald's Corp., Comcast Corp. and The Walt Disney Company. The index fell 35.3 per cent in 2008.
- iShares Global Consumer Staples ETF (KXI NY): Consumer staple stocks are issued by companies selling items that people need more than they want - like food, household and personal products, and — sadly — alcohol and tobacco. Top holdings include Procter & Gamble Company, Nestle SA, Wal-Mart Stores Inc. and Coca-Cola Company. The index managed to hold its losses last year to 21.3 per cent.
- iShares Global Energy ETF (IXC NY): The energy index is almost entirely dominated by oil and gas producers although it is open — in theory - to alternative energy companies that make the cut. The biggest global energy players are Exxon Mobile Corp., Chevron Corp and BP PLC. Plunging oil prices helped slash the index by 34.6 per cent last year.
- iShares Global Financial ETF (IXG NY): Global Financial stocks are basically the big banks but include big insurance and real estate companies. Top holdings in the fund are JPMorgan Chase & Company, HSBC Holdings PLC, Wells Fargo & Company and Banco Santander SA. Last year's financial crisis slashed 53.4 per cent from the value of the index.
- iShares Global Healthcare ETF (IXJ NY): Healthcare includes pharmaceutical, biotechnology, life sciences and healthcare equipment companies. Some of the bigger names in the fund are Johnson & Johnson, Novartis AG, Pfizer Inc. and Glaxosmithkline PLC. Health care skirted the worst of the sell-off last year — dropping only 20.4 per cent.
- iShares Global Industrials ETF (EXI NY): Companies that generally produce a finished usable product are considered industrial stocks, such as manufacturing, construction and transportation. According to Standard & Poor's the biggest global industrial stocks are General Electric Company, Siemens AG, United Parcel Service and 3M Company. The index fell 39.4 per cent last year.
- iShares Global Information Technology ETF (IXN NY): This sector includes software developers, hardware and equipment makers and semiconductors. Microsoft Corp. dominates the index followed by IBM Corp, Cisco Systems Inc. and Hewlett-Packard Company. Last year the global IT sector fell 37.7 per cent.
- iShares Global Materials ETF (MXI NY): The materials sector is generally made up of companies involved in the discovery, developing and processing of raw materials (mining, metals, chemical or forestry products). BHP Billiton Ltd. Is the largest holding in the index followed by Monsanto Company, BASF SE and Anglo American PLC. 2008 brought a 47.7 per cent decline for the sector.
- iShares Global Telecom ETF (IXP NY): The index includes the world's biggest telecommunications companies including AT&T Inc., Telefonica SA, Vodafone Group PLC and Verizon Communications Inc. The sector rang up a 31.1 per cent loss last year.
- iShares Global Utilities ETF (JXI NY): Companies that provide power through electricity, gas or water are considered utilities. Companies that dominate this index are E.ON AG, GDF Suez, Iberdrola SA and RWE AG. The index fell 32 per cent in 2008.
Dale Jackson has been a producer at Report on Business Television since its launch in September 1999.
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