Industry Disruptions and Diversification
Various market price dislocations occasionally deliver investors opportunities to build tactical overweight positions in certain sectors and industries to take advantage of relatively inexpensive equity or debt valuations. For example, in the spring and summer of 2020, equity valuations in the hospitality industry offered several opportunities to invest at attractive valuations for investors with a sufficient time horizon to benefit from an eventual resurgence in travel activity. However, even investments that are relatively attractive from a probabilistic perspective carry risk, and exogenous events like the recent ransomware attack that shut down the Colonial Pipeline and disrupted gasoline supply are a reminder of the importance of well-structured diversification, both within an industry and between different industries.
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- Anthony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management