Why SCHD May Lag SPY (Archive)
SCHD’s tech underweight and bank overweight create a macro setup favoring SPY instead.
This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.
Elevator Pitch
- SCHD has a significant underweight in technology and overexposure to banks.
- A dovish rate outlook is beneficial for long-duration tech growth stocks, but is a headwind for banks due to higher deposit costs weighing down on NIMs.
- Industry commentary suggests the tech spending is expected to rebound in 2025. Due to omission of this exposure, SCHD is vulnerable to lag the S&P500.
- Although elevated valuations of the Mag 7 stocks in SPY pose a risk, SCHD's valuation discount vs. SPY has reduced from 40.5% to 16.5%, making the former ETF less attractive.
- The SCHD vs. SPY charts show a lack of bullish follow-through following an initial sharp reaction from a 12-monthly support level.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
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