The tech sector is leading as markets rally on Thursday amid a volatile week.
This week has been particularly turbulent, as the S&P 500 rallied 1.6% by mid-day Thursday, after recovering from an early decline. The volatility is largely attributed to the regional banking turmoil, with markets rallying today on news of a group of big banks stepping in to support First Republic Bank, the latest bank to come under fire after the failure of Silicon Valley Bank.
Tech is leading in midday trading on Thursday, with the sector up nearly 3%. Investors looking to overweight the sector may want to consider an equal-weight strategy to take a more balanced approach to the sector to mitigate concentration risk.
“Investors are willing to take on risk again as the banking concerns have somewhat mitigated,” Todd Rosenbluth, head of research at VettaFi, said. “An equally weighted large-cap sector ETF provides a good entry point.”
The Invesco S&P 500 Equal Weight Technology ETF (RYT) offers exposure to the technology sector, but its underlying index utilizes an equal-weight methodology, meaning that component companies receive equal allocations at each quarterly rebalance. This results in exposure that is considerably more balanced than other alternatives. An equal-weight approach is particularly impactful in the top-heavy tech sector, which is dominated by just a handful of names.
The equal-weight methodology of selling relative winners and buying relative losers at each rebalance introduces a slight value tilt to portfolios, something that has paid off in the recent market environment.
Year-to-date, RYT has gained nearly 8% while the S&P 500 has climbed around 3.5%.
The S&P 500 Equal Weight Information Technology Index covers the following industries: internet equipment, computers and peripherals, electronic equipment, office electronics and instruments, semiconductor equipment and products, diversified telecommunication services, and wireless telecommunication services.
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