Navigating tariffs with Bloomberg’s expanded sector indices

This article was written by Sean Murphy & Rachel Sapp, Equity Indices Product Managers at Bloomberg.

The tariffs unveiled on “Liberation Day” have rattled equity investors the world over. As it is difficult to fully grasp the implications, some have chosen to sell now and ask questions later. In the 2 trading days after the tariffs were revealed (April 3^rd and 4th), the Bloomberg World Index (WORLD Index), which consists of equities from 47 developed and emerging countries the world over, was down 8.5%. If one looked only at broad sector indices during the same dates, it may have appeared that there was no place to hide. All sectors, including more defensive sectors like Utilities and Consumer Staples, suffered losses. High growth sectors like Technology and Communications, which have already been beaten down this year, traded further into the red. The Energy sector, which faced both tariffs and OPEC production hikes, was the worst performing over the 2-day period, down over 12%.

But these high-level observations tell only a portion of the story. Leveraging Bloomberg’s newly launched BICS suite of indices, one can observe trends as investors reposition for a new world. Bloomberg has launched over 800 new equity indices leveraging our proprietary BICS data (Bloomberg Industry Classification Standard). These new indices offer a scalable way of identifying segments of the market that appear to be weathering the storm better than others.

Communication services

The Bloomberg World Communications Index (WLSC Index) was down 7.7%, led largely by names like META, Disney, and Alphabet. But more traditional segments like Telecommunications (WTELLS3 Index) held up better, with that BICS Level 3 index down only 2.7%. Should the global economy head into recession, consumers may be more likely to cut their streaming services before their cell phone services.

Technology

After Energy, the World Tech Index (WLSTEC Index, -11.1%) was the worst performing sector. When we peel an additional layer of the onion back, we see that hardware (WTESLS Index, -12.8) and semiconductor indices (WSEMLS Index, -12.8), which are vulnerable to tariffs, fared far worse than software (WSFTLS  Index, -8.6%) and IT Services (WITSLS  Index, -7.3%).

Energy

Looking deeper into the energy sector, many of the best performing BICS sub-indices capture companies involved in some way with solar or renewable energy space. The Bloomberg World Renewable Energy Index (WRNWLS3 Index) was down only 3.8%, although a large portion of the relative outperformance can be attributed to the largest holding (First Solar, ticker FSLR). That company manufactures much of their solar cells domestically in the Unites States and may benefit from tariffs on international competitors.

Healthcare

The Healthcare sector was down 5.4%, with segments most impacted by tariffs faring the worst. The BICS Level 4 Medical Equipment Index (WMEQLS Index) was down nearly 10%, as many of the names within it are reliant on overseas production. On the other hand, more insulated segments of the healthcare sector, like Managed Care (WMCLS Index), were essentially flat over the period in question.

Industrials

Much like with the Tech sector, services are typically less vulnerable than goods to a trade war. The Industrial Services Index (WINSLS Index) outperformed the Industrial Products Index (WIDSLS Index) by 4.3%. Aircraft & Aircraft Parts names (WACPLS Index) were some of the worst performers within the broader Industrials space, down 13.6% over the two-day span. On the other hand, should companies look to create capacity and manufacturing locally, Infrastructure (WICLS Index, -4.7%) and Building Construction names (WBUCLS Index, -4.2%) may continue to outperform the broader space.

Real estate

The Real Estate sector fared better than most, down 5.2% during the period. In examining BICS Level 4 indices, the Infrastructure REITs Index (WIRELS Index), which consists of US-based cell phone towers, was essentially flat over the two-day period, while economically sensitive segments like hotels (WHRLS Index) and Retail (WRRLS Index) were under pressure. Much like communication services, the more staple oriented sub-indices fared better than those more sensitive to the strength of the consumer.

Financials

The Financials sector was one of the worst performing, down over 9%. The BICS Level 3 Asset Management Index (WAMGLS Index) was down by over 13%, while the more defensive Insurance Index (WIPSLS3 Index) fared better, down only 3.3%.

From chaos to clarity: The BICS advantage in sector investing

The Bloomberg Industry Classification System is a market-based industry classification system that creates groupings of issuers with similar activities and drivers, covering over 60,000 listed equities with up to 7 levels of granularity. Bloomberg Indices has leveraged this proprietary industry data to build free float market capitalization weighted sector indices at all levels of our Bloomberg Industry Classification System with over 20 years of history.

While it may seem at first glance that investors have been employing a “throwing the baby out with the bath water” type of approach, peeling back a few layers through a sector lens reveals that the impact has not been uniform. Some segments have shown relative resilience, helping to provide a more nuanced view of market dynamics. Our Bloomberg Sector Indices are built leveraging the transparent, representative, and intuitive BICS classification system. They are designed to be consistent with our Global Equity Index Methodology, spanning a variety of regions, countries, sector levels, and size segments, providing investors with precise and targeted exposure to help navigate through all market conditions. In times of volatility and recalibration, the ability to dissect markets with a high degree of granularity can help better understand where relative strength may be found.