Now is the time to have exposure to underperforming sectors in the North American equity markets. Find out more.
If you exclude eight of the largest technology companies, the S&P 500 is up nominally on the year. This situation can raise concerns or frustration for well-diversified investors, but it also presents a great opportunity toUnderperforming sectors often trade at lower valuations compared to their historical averages or the broader market. This provides investors with a favourable risk/reward ratio.
By investing in sectors that have temporarily fallen out of favour, investors can potentially capitalize on the recovery and subsequent growth, yielding higher returns compared to investing in already overvalued sectors.Article contentThe stock market is cyclical, with sectors taking turns in leading and lagging performance. Sectors that are currently underperforming may simply be going through a down cycle, and history has shown these cycles tend to reverse over time.
Investing in underperforming sectors during their troughs can position investors to benefit from the eventual upturn as market dynamics shift in their favour.Adding exposure to underperforming sectors can enhance diversification within an investment portfolio. This environment warrants spreading investments across a range of sectors.
Investors can reduce their exposure to any single sector’s risks and potentially achieve more stable long-term growth.Article content
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