Pick a sector, any sector! Time to be a buyer.
- Steve Economopoulos
- Apr 3
- 3 min read
Most people don't buy a cow when they need some milk in their refrigerator. Akin to this, many investors we talk to have heard the advice of "why don't I just put all my money in the index". This is not a bad idea, at times. And actually, when there is market fear and panic (as in the 4/3/25 Tariff tantrum), buying an index can offer a good benefit to your long term results. But here is our thought and how to think of that advice and how it relates to how we manage your portfolio.
A quick background on the S&P 500 index. The 500 companies that it represents will fall into one of 11 different sectors. You can see these in this table, as well as a number of time frames and varying performances (thanks to the Gorilla Trades service that provides this each month).
In hindsight, it becomes easy to see that buying the best performing sectors will always outperform the S&P index itself (as highlighted in yellow). So why not attempt to pick the sectors that may be geared to outperform? This is definitely not as easy as it is stated but our strategy and analysis works on your behalf to attempt to do just that. We call this Technical Analysis but it really has a lot to do with the business cycle on the short, intermediate and long time frames.
In 2025, our selected sectors we have held have been Energy, Utilities and Real Estate. We have also held an overweight in a few consumer staples stocks. If you read the previous post, this has helped contribute to maintaining values during a difficult few months. With tariff fear in the air, this is our time to evaluate where might be the best places going forward since we believe all areas will not be impacted in the same manner.
Buying the index (the cow) and adding to it regularly despite fluctuations is a good way to 'dollar cost average' into equity holdings and often can work for a retirement plan over a longer time frame. But our belief is to seek those sectors (the milk) that could be a better performer as compared to owning the entire group all the time. If you are interested in learning further about this and the way the S&P weights which sectors over others, Jake is keen on delving into the details to provide further data as to why owning sectors is a good strategy to consider.
In addition, when we see a panic strike as we have today, don't let this opportunity go to waste. It may feel painful, but the best times to make money over the longer term are when you buy in the face of fear. I always say that the stock market is the only place people seem to run away from when things go on sale! Consider what you can add to your portfolio and we believe looking back a year from now you will be glad you did!
Author: Steve Economopoulos
Published: 4/3/2025
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Important Disclosures: Any charts, graphs, or visual aids presented herein are intended to demonstrate concepts which cannot be fully explained without the assistance of a professional from EWM. Readers should not in any way interpret these visual aids as a device with which to ascertain investment decisions or an investment approach. Only your professional adviser should interpret this information. The Standard and Poor's 500 is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States.