A pivotal shift in stock market investments may be occurring as attention moves away from artificial intelligence stocks, according to John Davi, CEO and chief investment officer of Astoria Portfolio Advisors. Davi highlights an expanded investment landscape due to improved liquidity.
"The Fed cut rates four times last year, and they have reduced rates twice already this year. They're likely to do so again, whether in December or January," Davi shared on CNBC's "ETF Edge". "Traditionally, when the Fed cuts interest rates, it signals the start of a new cycle, often shifting market leadership subtly."
Davi pointed to recent growth in sectors like emerging markets and industrials. For instance, the iShares MSCI Emerging Markets ETF, which provides exposure to emerging markets, rose 17% over the last six months as of the close on Wednesday. Similarly, the Industrial Select Sector SPDR Fund saw a 9% increase in the same timeframe.
"These sectors can effectively offset the heavy concentration in expensive large-cap tech stocks prevalent in many portfolios," Davi added. "In an era of persistently higher inflation and Fed rate cuts, concentrating risk in just seven stocks seems excessive."
Davi advocates for a globally balanced investment strategy over a heavy emphasis on the "Magnificent 7," a group consisting of Apple, Amazon, Meta Platforms, Nvidia, Microsoft, Tesla, and Alphabet, which is trading near record highs. Together, these seven companies represent approximately one-third of the S&P 500.