Neglected sectors could experience a strong performance in the latter half of the year.
Mike Akins, co‑founder of ETF Action, urges investors to increase allocations to sectors that have lagged behind the leading AI stocks.
During an appearance on “ETF Edge,” Akins said his watchlist features software and cloud‑computing firms that have retreated from lofty valuations yet still present robust growth prospects.
‘These firms demonstrate that we still rely on software for everyday tasks,’ Akins remarked.
He also highlights disruptive technology as a compelling buy for the upcoming six months.
“It’s a thematic approach,” Akins observed. “It targets a segment further down the market cap spectrum, focusing on mid‑ and small‑cap stocks that have been overshadowed by the mega‑capmega-cap, semiconductor-led market. Analysts’ earnings growth estimates suggest these stocks could perform strongly, presenting a fairly optimistic outlook.
Akins, who previously led exchange‑traded funds at ALPS before launching his independent financial‑technology research firm, also points to opportunities within the underperforming Magnificent Seven index, which comprises Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple and Tesla.
‘Who would have predicted that the Magnificent Seven would be flat year‑to‑date at the midpoint?’ Akins noted, viewing the group as a solid catch‑up opportunity for the second half of the year.
In the first half of the year, the Magnificent Seven trailed the Nasdaq‑100, declining over 2% while the Nasdaq‑100 rose almost 20%.
Early signs suggest this trend is already taking hold: during the first trading days of the second half, the Magnificent Seven gained 5% whereas the Nasdaq‑100 slipped 1% as of Friday’s close.
Furthermore, Akins anticipates that small‑ and mid‑cap stocks will remain attractive through 2027, especially given the impressive performance small‑caps have delivered so far this year.
‘The lower‑tier stocks are beginning to catch up,’ he said. ‘I expect this momentum to persist through the year, driven not only by rising earnings and revenue but also by a rebound in valuation multiples that have been severely depressed for several years.’
To date this year, the Russell 2000 index, which tracks small‑cap stocks, has risen nearly 20%, while the broader S&P 500 is up about 11%.
