Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi James, The XSO small ords has tracked significantly lower than XJO this year, looking at a 10 year comparison i cant see the last time there was such a divergence between the two. Would you consider SSO or ISO etfs at this stage or if not now at some point if the divergence increases further? Many thanks for your excellent market commentary. Best regards Nick
Hi Nick,
This is simply a matter of the markets perceived confidence &/or risk appetite, currently the defensive sectors are performing strongly and generally this doesn’t include the small caps. Conversely when markets rally its the high beta names including tech and small caps that have been leading the way post COVID, and the GFC.
Rather than look at the ETF’s mentioned we would rather migrate up and down the risk curve depending on our market view using sector tilts i.e. this market is all about sector rotation hence until further notice don’t fight it. If your bullish stocks the small All Ords is likely to play some performance catch up but the tech names are likely to rally harder, and fall for that matter when confidence again wanes.
i.e. we would keep it more targeted and invest in different sectors during these volatile and exciting times – that’s where we think most value can be added.
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