In this Investment Insight we explore:

  • Why allocating among different sizes and styles of stocks in a portfolio often does not result in the kinds of uncorrelated returns it historically did.
  • How allocating among economic sectors when building a stock portfolio may be more beneficial than traditional methods of allocation.
  • The way in which allocating among economic sectors captures the sensitivity of stocks to the fluid, various, and unpredictable economic forces that drive those stocks.

Employing the traditional style or size methods of allocating to stocks doesn’t take full advantage of return differences and lower correlations. To more precisely access and capitalize on potential market opportunities we feel it is helpful to use economic sectors. Doing so allows us to see not just asset classes overall, but to take a more granular, refined view of the economic forces that drive those asset classes.

Please see important disclosures at the end of the publication.

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