BALANCING THE BARBELL: SECTORS AND THEMATICS


iShares 03/Mar/2021

KEEP IT BRIEF

  • We remain pro-risk and advocate a barbell approach to investing, with selective exposure to quality assets at one end of the spectrum and cyclicals at the other, via sector and thematic allocations.
  • We expect the activity restart to pick up pace, with cyclically-geared exposures positioned to capture the potential upside.
  • Yet amid ongoing uncertainty about the speed and timing of economies reopening, we also advocate building portfolio ballast through quality exposures and secular growers.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are as of March 2021 and may change as subsequent conditions vary.

KEY THEMES



We see cyclically-geared sectors as better-positioned to possibly capture the upside from an accelerating activity restart, and think cyclicals could have room to run despite the rotation we have witnessed in recent months. Sell-side forecasts also point to a pickup in fundamentals, with an expectation that cyclicals will drive earnings growth throughout 2021 and 2022. Rising inflation is a key theme that has driven market sentiment in recent months and could be an additional tailwind for cyclicals given their relatively high beta to rates.



While we see opportunities in cyclical assets geared to the reopening of economies, we also advocate building portfolio resilience through quality sectors, such as technology and healthcare – which also benefit from structural trends supercharged by the pandemic.



Thematic indices can offer exposure to longer-term structural tailwinds accelerated by the Covid-19 pandemic, while also combining cyclical and quality characteristics.


BALANCING THE BARBELL: SECTORS AND THEMATICS

Explore our latest whitepaper and discover our full views on sectors and thematics.