At the start of a new year, we traditionally ponder where to find relative outperformance among the market’s sectors. As such, we believe now is the time for investors to add risk to their portfolios by emphasizing more cyclical corners of the market. While a defensive approach to equities was the best strategy last year, our view is that continued economic improvement in the US, a quieting of the European sovereign-debt crisis and further growth in emerging markets justifies a more offensive stance. For 2012, our favorite sectors are industrials, technology and health care.

Although SPDR Dow Jones Industrial Average (NYSE: DIA) isn’t a straight industrial sector fund, it does offer heavy weightings in some of the best US industrial outfits, including Caterpillar (NYSE: CAT), Boeing Co (NYSE: BA), United Technologies Corp (NYSE: UTX) and General Electric Co (NYSE: GE). Some analysts worry about the competitive threat posed by China to US industrial names, but we see that concern as largely overblown. While more high value-added goods are produced in China, US firms are still the premier manufacturers of sophisticated industrial components. That’s a major positive for US industrials as both the developed economies and emerging markets continue to push for greater energy and production efficiency in 2012.

The exchange-traded fund (ETF) also has sizable allocations to US consumer staples and discretionary names such as McDonald’s Corp (NYSE: MCD) and Proctor & Gamble Co (NYSE: PG). The Global ETF Profits Model Portfolio has been significantly underweight the American consumer since we launched this newsletter back in 2010, but the slow and steady recovery in the US economy over the past several months makes us much more optimistic about consumer-oriented sectors.

The ETF also complements our position in Rydex S&P Equal Weight ETF (NYSE: RSP), rounding out our exposure to the US market without creating significant overlap. In fact, Bank of America Corp (NYSE: BAC) and Walt Disney Co (NYSE: DIS) are the only two holdings held by both ETFs.

SPDR Dow Jones Industrial Average charges a low 0.18 percent annual expense ratio. The ETF also passes along the dividends it collects on a monthly basis, which enables it to offer an attractive 2.4 percent yield.

The newest addition to our Growth Portfolio, buy SPDR Dow Jones Industrial Average under 130.

As noted earlier, we’re also positive on the technology sector’s prospects during 2012.

The evolution of cloud computing should continue to change the face of the technology sector. Cloud computing currently consists of three basic segments: “software as a service,” which means accessing applications through the web; “platform as a service,” which involves companies operating their IT environments via the Internet; and “infrastructure as a service,” where companies use highly scalable data centers for offsite storage.

Enterprises will continue their shift toward cloud computing platforms largely because these systems offer efficiencies in both cost and productivity. Rather than maintaining complex IT environments and expensive infrastructures, companies save by contracting it to third parties and sharing the expense with other users. Cloud computing will also allow for greater workforce flexibility, enabling employees to access essential data and applications remotely via the Internet.

The transition to the cloud has already been underway for several years, with about $3 billion spent on cloud computing in 2012. And some estimates project that US companies will spend about $13 billion on cloud computing initiatives within the next two years.

Those trends should continue to benefit companies such as Microsoft Corp (NSDQ: MSFT) on the software side, and Oracle Corp (NSDQ: ORCL) and IBM Corp (NYSE: IBM) on the hardware side. All three companies are heavily represented in the portfolio of our current Growth Portfolio holding iShares S&P Global Technology (NYSE: IXN), which also includes a bevy of other companies involved in cloud computing.

The ETF’s performance was essentially flat last year, largely due to technology spending concerns which developed during the second half of 2011. The sector faced numerous headwinds, including global economic uncertainty due to the European sovereign-debt crisis, slowing growth in emerging markets, and constrained government spending. Despite those challenges, technology research firm Gartner estimates that global technology spending grew by 6.9 percent last year to reach USD3.7 trillion, and that spending should rise to USD3.8 trillion in 2012. Gartner also estimates that spending will grow by a further 5 percent between now and 2015.

But that estimate is largely based on a continuation of anemic economic growth. While some regions of the world could remain mired in an economic slowdown, Gartner is discounting positive economic data in the US and economic strength in much of Asia. We believe the sector will outperform on a relative basis in 2012.

Continue buying iShares S&P Global Technology under 66.

Finally, we remain positive on health care.

It’s a well-known fact the average American is getting older. On January 1, 2011, the baby boomer generation began turning 65, and between 7,000 and 10,000 Americans will reach that milestone each day for the next 18 years. That major demographic shift is occurring across the developed world.

Aging baby boomers will be major drivers of health care consumption since seniors over 65 consume three times the amount of health care services as someone under 30. Since Americans already spend more than $7,000 annually on health care on a per capita basis, that’s going to be a huge jump in consumption.

Investors should also consider the fact that health care spending in the emerging markets has skyrocketed by more than 200 percent over the past decade according to the World Health Organization (WHO). That huge spending increase is largely being driven by improved standards of living in emerging market nations, as well as the increased adoption of Western-style medicine. Over the next decade, PriceWaterhouseCoopers forecasts spending on medical care to rise by 167 percent in China, 140 percent in India and more than 60 percent in Brazil. And those are conservative estimates when compared to data released by agencies such as WHO.

Meanwhile, US health care spending won’t solely be boosted by demographics. An improving economy will also contribute to greater health care consumption. With US unemployment finally trending lower, an increasing number of Americans once again have health insurance. And those newly employed citizens are getting the medical checkups for themselves and their families that they’d previously been postponing.

iShares S&P Global Healthcare (NYSE: IXJ) was one of our better performing sector holdings last year, with a gain just shy of 6 percent. We anticipate an even better performance from the ETF this year as a number of positive tailwinds coalesce for the sector.

Continue buying iShares S&P Global Healthcare under 58.