Excess Returns A Deep Dive into Sector Investing with State Street's Matt Bartolini
Jul 29, 2021
In this insightful discussion, Matt Bartolini, Managing Director at State Street Global Advisors, dives into sector investing. He explains how this strategy blends passive and active approaches, enabling investors to focus on entire sectors instead of individual stocks. The conversation reveals the current dominance of healthcare and tech in the S&P 500 and the implications of sector rotation strategies. Bartolini also examines thematic ETFs, the evolving market dynamics, and the challenges of traditional investment strategies like the 60-40 portfolio.
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Sector Concentration
- The top three sectors (healthcare, consumer discretionary, technology) make up over 50% of the S&P 500.
- This level of concentration is historically unprecedented and has implications for investors.
Communication Services Sector
- Communication services became a new sector in 2018, combining elements of consumer discretionary, technology, and telecom.
- This change reshaped sector classifications and prevented technology from becoming even more dominant.
Advantages of Sector Investing
- Sector investing offers a balance between passive indexing and individual stock picking.
- It allows investors to make active bets on market segments with higher dispersion than styles or countries, but less idiosyncratic risk than individual stocks.