Bull vs. Bear: Using Sector ETFs to Make Bets on the New Regime

Bull vs. Bear is a weekly feature where the VettaFi writers’ room takes opposite sides to debate controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play either angle. For this edition of Bull vs. Bear, Nick Wodeshick and Elle Caruso debate the case for using sector ETFs to make bets on the new market regime.

Nick Wodeshick: Hello, Elle! Since the new year has just begun, it’s an opportune moment to take a look at whether sector ETFs may be the right play for now. Given what happened last year and market anticipations for 2025, I believe sticking with specific sectors is still a good bet.

Elle Caruso: Hey, Nick. What a great time to talk about sector ETFs. I’m a bear; I believe investors are likely unable to beat the market by overweighting certain sectors.

Uncertainty has been a key theme in markets for the past few years, and will remain a theme throughout 2025, as the U.S. adjusts to a new administration. During periods of uncertainty, I believe investors are best positioned maintaining a well-diversified portfolio and avoiding any big bets. This includes making bets on particular sector ETFs.

History has shown that long-term investors could potentially enhance returns and reduce risk by maintaining a well-diversified portfolio. Instead of making bets on individual sectors, investors may want to consider the ALPS Equal Sector Weight ETF (EQL).

EQL provides equal exposure to each sector and, therefore, should be able to avoid the potentially adverse impact of rallies or crashes in specific sectors of the economy. EQL is interesting, as it utilizes a fund-of-funds ETF structure, investing equal proportions in 11 Select Sector SPDRs. The fund, which rebalances quarterly, delivers moderate yet meaningful exposure to every sector of the market, effectively removing sector biases.