Why US sector calls are 'waste of time' and add risk

Why US sector calls add risk

Spike Hughes, CEO of Cohesion Investments, explains why US fund managers need to stand up to their marketing departments.

For any market with a broad stock universe, like the US, sector calls are a waste of time and only add to risk. Quoted sector returns are just market weighted averages and the vast majority of stocks do not perform anything like their sector averages over three- to five-year periods. The emergence of mega-cap stocks in the US in recent years has added to the problem as sector numbers tell you really only what the largest stocks are doing, which is misleading. Energy and materials sectors are good examples. On average they are the worst performing sectors over the last three years, barely...