Strange market right now, huh? All year long, media, asset managers, and banks have touted the risk of a recession and the challenge of rising rates. That hasn’t stopped investors from helping megacap tech names to lift the S&P 500 overall. So what’s the real story? Speculation is driving ongoing interest in crypto, fringy tech, and other areas without real productive assets. That doesn’t mean there aren’t opportunities elsewhere, though, according to Richard Bernstein Advisors (RBA).
Investors and market watchers understand this somewhat and that’s helped incite this “see-sawing” between big investing themes this year. Some weeks, it’s all about investing abroad in markets where central banks already went completed much of their rate hike plans. In other weeks, the sun comes out and tech investing takes the lead. That can leave investors looking for a real idea about where to go.
According to RBA, that speculation also includes a “narrow leadership” in the market, with the survival of the fittest taking the lead. In this case, that means the megacap techs. So what gives? RBA draws a comparison to 1978 in its recent research, when investors also thought there were only two growth opportunities. By comparison, Microsoft (MSFT) and Apple (AAPL) now make up almost 15% of the S&P 500.
RBA’s research points away from a scenario in which the global economy is so difficult that just two firms can rule. Instead, it uses fundamentals-driven, top-down macro investing to assess where profits are accelerating or decelerating. By using indicators and in-house analysis, the shop looks across asset classes for the opportunities appropriate for the profit cycle.
Investors interested in the firm’s strategy can find it in their own in-house SMAs as well as in an ETF. The iMGP RBA Responsible Global Allocation ETF (IRBA) charges 69 basis points to actively employ that strategy.
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