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CIO Thoughts: The S&P 500 Is Up 34% Since October 27. Now What?

  • The Fed pivoted and acknowledged that rate cuts were on the horizon for 2024.

  • The average stock had a valuation that made the risk/reward favorable in our view.

  • Market sentiment was poor. Recall that “T-bill and Chill” was the mantra for most of 2023.

However, there has been a material change in several of the above-mentioned areas, coupled with a growth slowdown. Therefore, our ETF portfolios required some tweaking.

What has changed as of June 2024?

  • Market cap-weighted index valuations have richened considerably.

  • Inflation has been stubborn (the Fed has not been able to cut despite 7-8 cuts priced into markets at the start of 2024).

  • Economic data has softened.

  • Market breadth has been quite weak. See the chart below from MS.

Source: Bloomberg, Morgan Stanley Research

Data as of May 31, 2024. Source: S&P Dow Jones Indices.

Source: Bloomberg. @Mayhem4Markets

  • Front-end rates have been anchored, making equity risk premiums the worst in 20 years. In short, “T-bill and Chill” remains the mantra.

  • Many advisors are comfortable hiding in T-bills and nibbling on AI stocks, semiconductors, and other growth cohorts. This has made it painful for broader market participation.

  • We recently added growth stocks to our portfolio to hedge the risk that economic growth will continue to materially weaken. The analogy is that large-cap bellwether stocks are able to grow their earnings and profits regardless of the macro environment, interest rate, or credit cycle.

@AstoriaAdvisors

  • Rather than trying to determine when the Fed’s next cut will be, advisors should focus on the big picture and build a portfolio that can weather the storm.  Astoria prefers to stick with high quality stocks and a globally diversified multi-asset portfolio.  Markets never go up in a straight line, and bull markets last longer than one can imagine.

  • Lastly, if you haven’t seen details of Astoria’s Inaugural Macro Summit hosted at the Nasdaq MarketSite, visit astoriaadvisors.com/macro-summit.  We have a high-caliber lineup of speakers.

Best,

John Davi

For more news, information, and analysis, visit the ETF Strategist Channel.

As of June 25, 2024, Astoria Portfolio Advisors held positions in NVDA, MSFT, AAPL, AMZN, META, TSLA, GOOGL, and GOOG on behalf of its clients. There are no warranties implied. Past performance is not indicative of future results. Information presented herein is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. The returns in this report are based on data from frequently used indices and ETFs. This information contained herein has been prepared by Astoria Portfolio Advisors LLC on the basis of publicly available information, internally developed data, and other third-party sources believed to be reliable. Astoria Portfolio Advisors LLC has not sought to independently verify information obtained from public and third-party sources and makes no representations or warranties as to the accuracy, completeness, or reliability of such information. Astoria Portfolio Advisors LLC is a registered investment adviser located in New York. Astoria Portfolio Advisors LLC may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements.

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