While the potentially transformational AI buildout has driven impressive growth in the U.S. economy, the growing dominance of U.S. mega cap stocks may be leading advisors to reconsider the appropriate tools to build diversification and resilience into their clients portfolios. We outline several strategies for consideration.
Look beyond U.S. markets
U.S. equities have long benefited from strong corporate earnings, while developed markets outside the U.S. may offer better valuations and higher dividends.1
By incorporating Canadian and international equities, investors may benefit from geopolitical trends while mitigating the higher valuations and concentration risks found in U.S. equity allocations.
Diversify across asset classes
Investors may seek to enhance portfolio diversification by incorporating assets with lower correlation to equities, such as fixed income instruments and alternative assets like gold, as complementary potential sources of return.
Manage U.S. equity concentration
Investors seeking exposure to U.S. companies while managing mega-cap concentration risk may want to consider investment strategies that can help reduce mega-cap stock weight while maintaining a focus on growth potential and quality.
