Yesterday’s Equity Symposium brought together industry thought leaders. Attendees were treated to actionable information. Additionally, the panels presented cutting-edge thinking around equities. It was truly a can’t-miss experience. In the event you did miss it, however, we’ve got you covered. Here’s what happened.
Large-Cap Dominance
Fidelity’s Sonu Kalra and VanEck’s Coulter Regal kicked off the event by digging into large-cap opportunities. The first poll of the event showed 60% of the respondents anticipate a bullish end to the year for equities. Correspondingly, rate hikes are expected to come to an end.
Of course, questions remain around equity performance due to a majority of it being driven by “the Magnificent Seven.” These seven stocks make up one-fourth of the S&P 500 market cap. Concurrently, they account for roughly two-thirds of its performance in 2023.
Active Management Gets Its Due at the Equity Symposium
There is concentration risk in the U.S. stock market right now. Accordingly, the second session focused on active management. Active ETFs have garnered roughly one-third of year-to-date flows, according to Todd Sohn, director of Strategas Securities Technical Analysis team.
Active managers have a unique ability to sidestep concentration risk rapidly. In comparison, passive strategies often require investment committees to meet before making changes.
Strategic Sector Allocation
Denise Chisholm, director of Quantitative Market Strategy at Fidelity, and Mac Sykes, a portfolio manager at Gabelli Funds, discussed some of the most appealing sectors to them as 2023 closes. Chisholm highlighted the consumer discretionary sector as a sector she is paying attention to. She emphatically believes that there is a lot of opportunity in that sector. Sykes and his firm are looking at financial services. They are seeing investors coming circling back to this sector.
The Equity Symposium Looks at Dividends
Dividends have been critical for the defensive portion of portfolios in recent years. However, this year has seen their performance drop. Amplify CEO Christian Magoon noted that despite some bright spots in energy and materials, “broad-based, it hasn’t been as great a year.” Franklin Templeton’s Todd Mathias agreed, but pointed out that dividend funds are seeing year-over-year inflows, largely due to valuations.
Mathias also highlighted the consistent year-over-year inflows to international dividend products he has seen. Magoon mentioned funds that are in the energy and materials space have been a bright spot for dividend funds this year.
Mid and Small Caps Find Their Moment at the Equity Symposium
The panelists for the fifth session, SS&C ALPS Advisors SVP, director of ETF Portfolio Management & Research Andy Hicks, and VanEck product manager and CFA Coulter Regal, talked about opportunities in the mid and small-cap spaces. Regal noted the increased interest in these spaces, given the concentration risks in the market and said, “There is documented outperformance versus large-caps when you go back decades and decades. It hasn’t played out like that over the last few years, but I think more and more people are starting to wake up to the opportunities in small caps now.”
Valuation Matters
The sixth session focused on the importance of valuation in high-concentration markets. Comparing the market to the Dickens classic, A Tale of Two Cities, Jay McAndrew, head of strategic beta sales at Columbia Threadneedle said, “You have to beware of bifurcation.” Jacob Gerber, meanwhile, noted that the top quintile of dividend payers are currently trading at a remarkable 25% discount relative to the rest of the S&P.
Thematic ETFs Continue to Evolve
For the final session, Todd Rosenbluth moderated. The panel included Engine No. 1’s Eli Horton and Xtrackers’ head of systemic investment solution, Americas, Arne Noack. Noack said, “If you wanted to express a conviction that semiconductors are something quite critical to the future growth of the United States or the global economy and you want to participate in that, you can take a very specific position in that theme through the relevant ETFs that are out there in the market.”
Horton discussed Engine No. 1’s investments in massive systems changes. Accordingly, he focused on the reshoring of global supply chains and the worldwide pivot from fossil fuels toward solutions to the climate change crisis. Horton observed that many businesses that profited from the old way of doing things are actually well-positioned for adaptation to these huge systemic changes. “We tend to look at these businesses as the winners of these themes. The markets ignored a lot of old-economy companies for the past 15 years. We see a future that’s quite bright for them, and that’s a very nice setup for a sector investor,” he said.
Fortunately, if you missed the big event, a playback will be made available soon.
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