As markets remain volatile in 2023, investors may be surprised to learn the three sectors posting positive returns year to date.
The only three sectors generating positive performance year to date as of March 23 include communication services (+18.1%), information technology (17.2%), and consumer discretionary (+10.0%). Notably, these three sectors were among the worst performers in 2022, now staging an impressive recovery rally.
As investors look to allocate to these sectors while prices are still discounted, there are equal weight sector ETFs in these top-heavy sectors worth considering. Equal weight sector ETFs reduce concentration risk, preventing a small group of the largest companies from having an outsized impact on the index; a prime example is Meta’s impact on the cap-weighted communications services sector in 2022.
Investors can get equal weight exposure to the sectors with the Invesco S&P 500 Equal Weight Communications Services ETF (EWCO), the Invesco S&P 500 Equal Weight Technology ETF (RYT), and the Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD).
Looking at factor exposures, consumer discretionary, information technology, and communication services all tilt away from low volatility, which negatively impacted the sectors’ performance in 2022. All three sectors tilt toward high beta, while communication services also has a value tilt.
Companies included in the consumer discretionary sector include Etsy (ETSY), Tesla Inc. (TSLA), Amazon.com, Inc. (AMZN), Ford Motor Company (F), TJX Companies Inc. (TJX), Las Vegas Sands Corp. (LVS), Ross Stores, Inc. (ROST), Norwegian Cruise Line Holdings Ltd. (NCLH), Target Corporation (TGT), and Starbucks Corporation (SBUX).
EWCO comprises companies including Meta Platforms (META), Warner Bros Discover Inc (WBD), Paramount Global (PARA), Netflix Inc (NFLX), AT&T Inc (T), Activision Blizzard Inc (ATVI), Comcast Corporation (CMCSA), and Walt Disney Company (DIS), among others.
Names in RYT include Advanced Micro Devices Inc (AMD), NVIDIA Corporation (NVDA), Microsoft Corporation (MSFT), Salesforce Inc (CRM), Applied Materials Inc (AMAT), QUALCOMM Incorporated (WCOM), and Intuit Inc (INTU).
For more news, information, and analysis, visit the Portfolio Strategies Channel.