2017 was a strong year for equity markets globally, but we saw even stronger performance from Shariah equity markets. While the S&P Global BMI (an all-cap global index) rose 24.8% for the year, its global Shariahcompliant counterpart rose 27.4% (see Exhibit 1). In the U.S., the S&P 500® saw a gain of 21.8%, while the Shariah-equivalent U.S. index rose 22% for the year. Since 2008, when financial stocks were in the doldrums, the outperformance of broad Shariah-based indices has highlighted their absence from the market. In 2017, the performance of the global financials sector was an impressive 24.1%, indicating that there were some other factors at work.
A closer look revealed that the information technology sector, which reflected over 30% of the weight of global Shariah equities, grew 41.3%, far overtaking the financials gain and making up for the loss that Shariah indices suffered due to the absence of financials. Information technology and financials make up the largest difference of sector weights between broad-based global equities and their Shariah-compliant counterparts (see Exhibit 2).