What 2022 Taught Us About Equity Market Sectors
By Anna Ellis
Loading...

Real Estate and Tech Sectors Down

Mortgage rates are at their highest levels in years, and the phenomenon of rising rates is manifesting a slowdown in the housing market. Additionally, the real estate market has had to battle commercial property declines, and the commercial real estate investment trusts (REITs) in the index have contributed to the year-to-date decline of 26% in the S&P Real Estate Select Sector index. While inflation is showing signs of moderating and interest rate hikes are potentially tapering off, the real estate market is likely to continue experiencing volatility whether these phenomena persist or reverse course. CME Group lists two different real estate sector futures, E-mini Real Estate Select Sector Futures and Dow Jones Real Estate Futures, giving participants multiple opportunities to manage their real estate exposure.    

Technology stocks have also suffered in recent months after experiencing heightened levels at the start of the pandemic. The S&P Technology Select Sector index is down around 25%, with big names like Alphabet, Microsoft, and Meta all losing over $2 trillion in combined market capitalization since the start of this year.

Additionally, the semiconductor market has experienced volatility since the start of the pandemic, between chip shortages and disrupted supply chains, providing some context to its steadily negative dispersion shown in the chart below. The performance of semiconductors is yet another example that highlights the theme of sector dispersion and why futures can be a useful tool in managing these varying risks. The six sectors shown in the chart below were recently introduced as sector futures to provide investors greater flexibility in increasingly popular economic sectors.

Dispersion of S&P Industry Sectors and PHLX Semiconductor Index

The sector story of 2022 points to an increased need to manage sector-specific risk, and sector futures are one way to do so. CME Group offers 19 different sector futures, including E-mini Select Sector, Select Industry, Dow Jones Real Estate, and PHLX Semiconductor Sector futures.

An important recent development in the sector futures suite is the introduction of Derived Blocks, which are available to trade on all CME Group sector futures. A derived block is a block trade in which the price and quantity of the trade depends on hedging transactions in an eligible related market. This new trading functionality allows clients to source liquidity from a related market and thus helps facilitate the intraday execution of larger orders. In addition to being traded via derived blocks, CME Group’s sector futures can be traded outright on CME Globex, as outrights, blocks and via Basis Trade at Index Close (“BTIC”), which allows participants to trade against the closing underlying index value..

A new year brings new market phenomena. However, as 2022 reminded us, uncertainty is ever-present in equity markets. Watching individual sectors rather than only broad index performance can highlight risks and opportunities for investors, and can help them manage risk accordingly.  

Loading...

About the author

 

 

OpenMarkets is an online magazine and blog focused on global markets and economic trends. It combines feature articles, news briefs and videos with contributions from leaders in business, finance and economics in an interactive forum designed to foster conversation around the issues and ideas shaping our industry.

All examples are hypothetical interpretations of situations and are used for explanation purposes only. The views expressed in OpenMarkets articles reflect solely those of their respective authors and not necessarily those of CME Group or its affiliated institutions. OpenMarkets and the information herein should not be considered investment advice or the results of actual market experience. Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. BrokerTec Americas LLC (“BAL”) is a registered broker-dealer with the U.S. Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (www.FINRA.org), and is a member of the Securities Investor Protection Corporation (www.SIPC.org). BAL does not provide services to private or retail customers.. In the United Kingdom, BrokerTec Europe Limited is authorised and regulated by the Financial Conduct Authority. CME Amsterdam B.V. is regulated in the Netherlands by the Dutch Authority for the Financial Markets (AFM) (www.AFM.nl). CME Investment Firm B.V. is also incorporated in the Netherlands and regulated by the Dutch Authority for the Financial Markets (AFM), as well as the Central Bank of the Netherlands (DNB).

©2025 CME Group Inc. All rights reserved