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As Wall Street braces for a rotation out of tech stocks as small caps rise, CFRA Research Chief Investment Strategist Sam Stovall joins Wealth! to discuss how investors can best position their portfolios.
"I think investors right now, first off, should make sure that they are not going to allow their emotions to become their portfolio's worst enemy," Stovall explains. He calls the rotation out of Big Tech "quite natural and necessary," as other stocks that were under pressure during the tech rally finally see some growth.
He adds that the participation expansion is "actually positive for equities, because now more and more of the constituents within the broader market are participating in the advance." If investors want to take a look at their investments, Stovall advises, "simply hit the rebalance button on your 401(k), take a look at all of the stocks and ETFs that you have to see what exposure you do have to technology. In the S&P 500 (^GSPC), it's a little more than 33%. On an equal-weighted basis, it's about half that. So just make sure you don't have way more exposure to tech stocks than you have in the broader market."
Thanks so much for joining us today. Look, we've been talking a lot on Yahoo Finance about the rotation that we're seeing out of tech and into some areas like small caps. What are you bullish on and what do you think is undervalued at this point?
Well, good to talk to you, Alexandra. I think investors right now, first off, should make sure that they are not going to allow their emotions to become their portfolios worst enemy. Yes, we are seeing a rotation away from the tech stocks, these mega caps that had been leading the market over the last two years. Um, but I think that's actually quite, uh, natural and necessary. Now, we are rotating into what I call the also rans. Uh, and these are the groups, uh, that did not do well when tech was doing so well. But because of this participation expansion, that's actually positive for equities because now more and more of the constituents within the broader market are participating in the advance. So I would say to investors, if you feel like you have to do something, simply hit the rebalance button on your 401k, uh, take a look at the all of the stocks and ETFs that you have to see what exposure you do have to technology. Uh, in the S&P 500, it's a little more than 33% on an equal weighted basis. It's about half that. So just make sure you don't have way more exposure to tech stocks than you have in the broader market.
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This post was written by Melanie Riehl