Capital Goods Sector

The capital goods sector, also known as industrial sector, is a category of companies that distribute or manufacture goods. This includes every kind of manufacturer you can think of...the companies who make the machines to make an item, the companies that actually make the item with that machine, and the people who distribute that item.

This sector (and therefore the companies' stocks) tend to be reaaalllly impacted by the economy. Think about it: when the economy gets shaky and people start losing jobs, they don't buy new cars as often, do they? That hesitancy to buy a new car means that the businesses that make the cars suffer too.

When the housing market crashed in 2008, businesses that produced equipment to build homes or the materials used (like wood) started to suffer. The capital goods sector can be affected by more permanent changes as well. If a new product comes along and changes how something is done (say, makes a machine obsolete), the business that makes the old-style machine, and the businesses that make the parts for the machine, will all suffer...and perhaps even go out of business altogether.

Consider technology and how fast it changes. When cell phones came out and became affordable, the old plugged-in-the-wall-with-a-cord phones became less popular (I mean, when did you last see one?). That sector was permanently altered by technology available to consumers...and therefore, the businesses that made all those pieces (right down to the curly cords) were also impacted.