Sector Bird’s Eye View: Services

Table of Contents

 

What is it?

The services sector involves companies that provide a wide array of services rather than physical products. These include non-financial professional business such as HR and research consulting, office services, printing, security and facilities services. It also includes consumer related services such funeral companies, cleaning services and postal services. Developed countries typically have stronger services sectors. 

Why is it important?

The services sector is an incredibly important part of a country’s economy, forming one of the three pillars of the economy next to the primary and manufacturing sectors. This sector is responsible for the largest portion of an economy’s business-related activity as it encompasses companies from many different parts of the economy. 

Popular Participants

  • Capgemini
  • Accenture
  • Adecco
  • ADP
  • GoDaddy

Popular ETFs

  • iShares US Consumer Services
  • iShares Global Financials
  • iShares Global Comm Services 

When does it do well/badly?

The services sector tends to do best in an expansionary market when consumers have plenty of disposable income to spend on non-essentials. Low interest rate environments create the optimal environment for companies in the services sector to outperform. However, tighter financial conditions cause significant performance issues for the services industry. 

Why should I invest? 

Given the great many options within the services industry, every portfolio is bound to have a services component to it. Identifying the most dynamic part of the services sector and investing alongside the latest trends and technologies can provide excellent returns. As an industry, the services sector is growing at a rapid pace and looks set to grow further, especially in China, as nations attempt to move away from purely export-driven growth models. 

 

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