A notable shift away from artificial intelligence stocks might be occurring in the market landscape. John Davi, CEO and chief investment officer at Astoria Portfolio Advisors, asserts that liquidity returning to the system is giving a broader variety of stocks a 'green light.'
'The Fed cut rates four times last year. They have already cut rates twice and are expected to do so again soon, whether in December or January,' Davi mentioned in his CNBC's 'ETF Edge' interview this week. 'Historically, when the Fed cuts interest rates, it usually marks the beginning of a new cycle. Market leadership often shifts subtly.'
Davi notes the recent performance of sectors such as emerging markets and industrials. The iShares MSCI Emerging Markets ETF, which follows this segment, has risen 17% over the past six months according to Wednesday's close, while the Industrial Select Sector SPDR Fund recorded a 9% increase over the same timeframe.
'I believe these areas can serve as a good counterbalance to the expensive large-cap tech positions that dominate many portfolios,' he observed. 'We live in a world of structurally higher inflation. With the Fed cutting rates, why concentrate risk into just seven stocks?'
Davi advocates for a globally balanced investment strategy rather than heavily investing in the 'Magnificent 7,' which includes Apple, Amazon, Meta Platforms, Nvidia, Microsoft, Tesla, and Alphabet. This group is currently trading near all-time highs and constitutes approximately one-third of the S&P 500.