With the stock market cycle turning, investors are encouraged to take a fresh look at their portfolios in order to meet the changing environment. The weight of the top eight mega-cap stocks has skyrocketed to almost 40% of the S&P 500 index. Failure to sustain this positive trend may have large consequences on T score and future performance. Experts like Josh Sohn and Andrew VanCronkhite have shared their insights on upcoming market challenges and opportunities, particularly within the health care sector and other undervalued areas.
Warren Buffett’s Berkshire Hathaway made news lately with its decision to concentrate investments into the health care industry. This tactical decision was a big shot in the arm for UnitedHealth shares, which rocketed after Buffett’s new investment was reported. As Sohn cautions, if we expect health care to do better in the future, we need the big market players to underperform. Non-existent demand for defensive stocks He gives a lot of attention to the lack of current demand for defensive stocks. He writes, “There has been zero demand for defensives,” as in health care.
It might feel like all is lost with health care. Sohn and VanCronkhite have discovered encouraging prospects for growth within the industrials and materials sectors. They further highlight the need for investors to start repositioning their portfolios in anticipation of such a market tilt toward value stocks. It’s about realizing that now is the time to start moving and diversifying your exposure,” said VanCronkhite, underscoring the shift toward proactive investment strategies.
Sohn addresses the inflation bugaboo, pointing out that core Consumer Price Index (CPI) still stands at 3.1% as of July. In light of all this, investors should be wary. Missing from his comments, but equally important, is the chance of a September rate cut which would inject even more positive market dynamic. He believes the first step in mitigating tech concentration risk is to avoid holding a core stock market index fund alongside large-cap growth and tech stock funds.
“Pull some money away from the past champs, such as technology and financials,” VanCronkhite encouraged. This view is consistent with their overall plan to diversify into unpopular industries. Sohn suggests that investors practice portfolio diversity. He encourages them to “go off the reservation” and purchase from the “sterile” parts of the industry to build their resilience.
Incredible momentum from the S&P 500’s technology and financial sectors have propelled the index to record heights in 2025. This concentration poses powerful dangers as well. Sohn maintains that although there are currently no signs of massive risk, historical trends suggest that a sudden market correction could occur. Otherwise, the public could be faced with another speed bump as we witnessed this past April. This time, it wouldn’t arrive as quickly or be quite as damaging.
Sohn singles out transports and small-cap stocks for his investment strategy changes. He thinks these small sectors have desirable valuations relative to their bigger brethren. This small sector growth trend may be key to helping diversify portfolio exposure away from an eventual mega-cap stock downdraft.