Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re talking about themes driving U.S. equities with Jyotsana Wadera, senior investment director with Putnam Investments. We talked about return drivers and interest rates. And we started by asking about where she sees the most compelling opportunities in the second half of 2026.
Jyotsana Wadera (JW): I think the most compelling opportunities today are increasingly outside of this narrow group of mega cap stocks that have dominated the market. The Mag 7 has actually underperformed a vast majority of other technology names across the U.S. equity markets. So, when I think about what the opportunities are, they’re outside of the Mag 7. And I think that bodes great for active managers who can find ideas outside of this concentrated cohort of stocks. The market still underappreciates the second-order beneficiaries of AI. Those are companies that are enabling AI adoption. Of course, that still means technology and communication services. But there’s infrastructure names, power generation, industrial automation, software productivity. Within the health-care sector, we are going to see the benefits of that. And that’s where we think the market has underestimated the earnings power and the potential productivity gains.
Where she’s finding opportunities
JW: We find attractive opportunities in select semiconductor companies, industrial companies, financials that are improving efficiency and capital returns. And we’re also seeing selective opportunities across small- and mid-cap that can also leverage AI, that is still not priced into the market. I would say you have seen the breadth in the U.S. market this year more than you have seen in the last three years, and we’re excited about the opportunities elsewhere. Software year to date has been a relative loser versus semiconductor and memory names, which have massively outperformed. But that doesn’t mean that has to be the status quo going forward. There are beneficiaries in software, but there’s definitely going to be losers as well, and we want to avoid the losers. There’s a lot of software companies — Salesforce, Adobe, and others — that have to prove that you have to pay for their graphics or their ability to generate documents when that’s something that a lot of AI already has built in. So, our job is to say which are the software companies that are going to win and which are the software companies that are going to lose.
Interest-rate sensitivity
JW: Generally, interest rates favour those businesses that have pricing power, limited refinancing needs and a consistent balance sheet strength. Now, generally, a higher-interest-rate environment, if you had to look broadly at the U.S. economy, tends to favour financials, tends to favour select industrials. Health-care companies tend to do better. And then any companies that have a recurring revenue stream. If you have a strong customer base and you have a recurring revenue stream, you tend to be more resilient. But we don’t make a sector call. We’re within plus or minus 3% of every sector. Our job is to get the companies right. We’re not focused on getting the sectors right, because we are going to be kind of risk aware, benchmark aware. But, regardless of the interest rate environment, we tend to avoid highly leveraged companies in general in this portfolio.
Names she likes
JW: Some of our best ideas within AI — and let’s call it the infrastructure — is Lam Research. They make semiconductor equipment to help with manufacturing. They’re not doing the actual manufacturing, but you need Lam’s equipment to do the manufacturing. So that’s an infrastructure play that we like a lot. GE Vernova is power generation and grid investments. Caterpillar, you don’t think of them as direct AI beneficiaries, but you’re going to have to be building some more data centres and infrastructure; Caterpillar will be an indirect beneficiary. Within financials, we’ve liked the credit card companies. Mastercard comes to mind. In terms of health-care names, I’d highlight Eli Lilly — leadership in obesity and diabetes treatments, a very steady grower, a strong pharmaceutical company that we have visibility into their growth. And then Intuitive Surgical is another health-care company we’ve liked. Robotic surgery, health-care technology. Those are kind of some of our best ideas.
How Canadians should position themselves
JW: If you look at the Canadian TSX, you’ve got financials, and then you have natural resources and energy. What you get with U.S. equity investing, is exposure to some of the most transformational sectors and those that have been driving growth broadly in the U.S. economy, in Canada, in Europe and globally — sectors such as technology, also communication services, infrastructure, industrials and health care. So, when blending your Canadian exposure to some of the U.S. exposure, you really get this broad sector exposure.
And finally, what’s the bottom line on investing in U.S. equities in the current moment?
JW: I’d say the easy gains and multiple expansion may be behind us. But, to me, the investment opportunity within the U.S. remains very compelling. We are transitioning from a market driven largely by enthusiasm and earnings growth, towards an environment that is going to favour active management. The message to investors is not simply buy the market; be active in managing your market exposure.
Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Jyotsana Wadera of Putnam Investments. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.
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