Well, the investment landscape has been anything but stable and predictable over the years, with tech booms as well as price swings across all asset classes.
Now what strategy gaining attention is sector funds that let you step back from a particular industry when risks rise without abandoning the broader market.
In a market dominated by big tech and constant disruption from artificial intelligence, tariffs as well as global shifts, staying flexible matters.
So joining me to talk about how investors can navigate opportunities. and risk.
It's Damian Hyman, global investment strategist at ProShares.
Great to have you here.
Thank you so much for joining me.
Thanks so much for having me.
Well, it's been quite the year, hasn't it, 2025?
And if we need a lesson on diversifying risk, just look at the landscape.
So tell us how this can be done with X sector ETFs.
We're celebrating the 10th anniversary of our X sector ETFs, and they are exactly what they say they are.
You're just eliminating one sector from the S&P 500.
We have SPXT.
X Technology SPXEX Energy SPX VX Healthcare, and SPXNX Financials because look, the odds are you've got a view on not 9 or 10 sectors.
You've got a view on 1 and this is very simple.
It's an easy to use tool in an ETF form.
To just trim one sector out but maintain that broad exposure.
And Simeon, I do want to ask you about the why.
Can you walk us through an example for people out there who are watching this right now?
We think of three examples.
One is, you know, kind of the most obvious.
You just have a bearish view.
You have a bearish view of a sector.
Take the energy sector as an example.
Oil prices are going like this.
The sector is underperforming.
If you think the energy prices are not going to rebound, that's a big driver for the sector.
You just take it out and look, it's a modest size in the S&P, so it's not a massive benefit, but it can be a meaningful one to move performance.
The second one is The obvious with the technology sector.
It's just big and it may be too big for your portfolio.
Now look, it's 30% of the S&P 500, so just taking it out wholesale is a huge bet.
But if you think of the use case for our technology ETF, it could be just to modify and reduce that.
Exposure that you may have in single stock form.
You may have a few of those individual winners, and this is an easy way to balance that out or trim maybe not from 30 or 35% of your portfolio, but maybe you feel more comfortably with 20 or 25% so you compare it with other vehicles or other single stocks in your portfolio.
And I think the one that people don't think a lot about, but that's really important is where you work.
Where you work is really important because that's where the bulk of your exposure is.
Think about the following.
You're in your mid-50s, you've been a great saver, you've got a couple million dollars in your rollover account.
You work in the healthcare sector, you're going to work 10 or 15 more years.
The value of your income stream dwarfs even that healthy rollover account.
And so to diversify your human capital, it may very well make sense to take a sector out of your investment capital.
Yeah, and I mean, when we take a step back and look at the market action in equities or even other asset classes in 2025, there's been a lot of volatility.
So how should political factors, whether we're talking about the regulatory landscape, expectations, or tariffs, how should that influence investment decisions and what can investors out there actually do to protect themselves?
It's certainly an important piece of the puzzle, and part of it is that It's too easy to think that sectors are cheap.
Because all sectors except technology are cheap relative to technology, but if you look as an example, go back to healthcare, people say, well, healthcare is cheap.
It's actually right on its 10 year average PE.
So if you're worried about the political issues with regards to healthcare and policy initiatives or tariff initiatives, which have also been healthcare, that's certainly a place where you might want to turn back exposure.
And again, the X sector approach is an easy one because it leaves everything else as it is in the market.
And it is holiday season.
So what if you've been gifted, say, a single stock, a large position, or perhaps you've inherited one?
Yeah, look, if you have a single position.
And the issue is that and you want to diversify that it goes back to this very, very useful use case of the X technology as an example because that's probably the thing you got.
You have that one stock and the problem is that you may not want to incur the capital gains by selling or trimming that position.
And so pairing it with, say, SPXT RX technology ETF is a great way to balance off the sector exposure by allowing you to leave that individual stock position alone and not have to take that capital gains hit.
Yeah, and finally, you mentioned that this is the 10 year anniversary of the fund and we've been through several market cycles as well as monetary fiscal cycles in the decades.
So what are some key takeaways that you have learned watching the performance of the fund?
The performance of the ETF, yeah, what we've seen is there has absolutely been an outperformance opportunity.
The nice thing about sectors is The under or outperformance has a little bit of persistence, so it's not a one day or one week or one month thing.
You have an opportunity to exclude energy for not a month, but you could have 1218 months of underperformance.
So what we've seen over the 10 years of the X sectors is you don't have to really think about these as one week in one week out.
The trends in. persist for quarters and even a couple of years, giving you an opportunity to shape performance or modify exposure in a meaningful way over a nice time horizon.
Well, Saminen, it was great to have you here.
Thank you so much for joining me and thank you for sharing all of your insights.
Thanks so much for having me.
My pleasure.
