This stock index – which you maybe never heard of – is nearly as vibrant as tech

With AI hype dominating the stock market, you can probably guess – and guess correctly – that this year’s top-performing global stock sector is tech. But which sector has come in just a whisker behind it?Call, text, email or otherwise message your broker: It’s a funny index that’s barely six years old called “Communication Services.”Never heard of it? You aren’t alone. So what is it, and does it have staying power?Communication Services mashes growthy, tech-like firms with traditional media and stodgy old telecoms – a tale of diverging industries.

Its predecessor was the telecom sector – classically defensive, highly regulated, boring, slow-growers. Their steady revenues, big dividends and low volatility make them pretty darned economically insensitive.

Hence, they lead in down markets. Consider: S&P 500 telecom stocks beat the broader index in four of five bear markets since 1990. The exception, 2000 – 2002, was when fantasies like WorldCom, Global Crossing and Lucent fantastically imploded.

But stodginess cuts both ways. Telecom lagged in four of the last five bull markets—hugely. The average underperformance? A whopping 128%. Since October 2022’s low, S&P 500 and World Telecom returns are less than half the broader indexes’ gain.

In 2018, however, index providers S&P and MSCI did some rejiggering – maybe a little too quietly – that shook up how investors can approach many of these companies.Namely, they concluded several Silicon Valley giants didn’t belong in tech anymore. They were 21st Century takes on communications, profiting more on ads than hardware and software. Their solution?

Combining several tech giants with media companies and defensive telecoms in a new “Communication Services” sector.