Don’t get myopic and lose sight of the big picture. We had a 10-year period where investor portfolios were dominated by mega-cap, US growth stocks. This tilt produced attractive risk-adjusted returns, but investing is about buying low and selling high. Maintaining an overweight towards a cohort that is expensive, over-owned, and where the upside is limited feels counterintuitive from an investing standpoint.
Capital is ultimately allocated in search of the best return per unit of risk. We think the mid-cap/smaller-cap space offers an attractive return per unit of risk on a forward-looking basis as the interest rate cycle begins to take effect. We are not saying that this factor will specifically work today, tomorrow, or next week. We simply argue that investor portfolios need to evolve in the next 1, 3, and 5 years, and this market segment looks attractively priced.
Astoria recorded a video discussing our thesis behind the Great Rotation, sharing charts and data to back up our view; watch that here. We are going to be hosting a webinar titled, ‘Diversifying Away from the Mag 7,’ with SSGA, Clark Capital Management, and VettaFi on August 6, 2024. Sign up here.
Lastly, if you are in the tri-state area, we are hosting a luncheon on August 15, at the Capital Grille on 51st Street in New York. Let me know if you are interested in attending.
Best,
John
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