Past performance is not indicative of future results. Yet many people seem comfortable with a portfolio for 2024 that looks a lot like 2023. Don’t count John Davi as one of them.
Davi is the founder, CEO, and CIO of Astoria Portfolio Advisors. Before that, he was the head of Morgan Stanley’s Institutional ETF Content. He structured ETF portfolio solutions for many of the world’s institutional asset managers. Astoria Advisors is a NYC-based independent investment management firm. Davi and team specialize in the construction, portfolio management, and model delivery of cross-asset, thematic, and quantitatively driven portfolios.
Recently two of Astoria’s portfolios became available as stand-alone ETFs. Davi will be speaking about them during the VettaFi Market Outlook Symposium tomorrow Thursday, December 14 at 12:50 pm ET.
“There’s a specific portfolio to own when rates are rising and an entirely distinct portfolio when rates are declining,” explained Davi. “The market is pricing in rate cuts, not rate hikes, in 2024. This inherently translates into a new market cycle, and hence, a different portfolio.”
Making a List…
Astoria Advisors puts out an annual 10 ETF themes to focus on. The new list has 13 ETFs not 10, for example, as there are hedged and unhedged international equity ETFs included. However, given the rigor used to put it together, I think the list is worthy of a deeper dive beyond the tickers.
In 2023, the magnificent seven mega-cap stocks drove the S&P 500 and the NASDAQ-100 higher. Yet, heading into 2024 Davi advocates reducing the exposure to these U.S. stocks using equal-weighted ETFs.
For example, the Direxion NASDAQ-100 Equal Weighted Index ETF (QQQE) and the Invesco S&P 500 Equal Weight Technology ETF (RSPT) are included on the Astoria list. Relative to the market-cap weighted Invesco QQQ Trust (QQQ) and Technology Select Sector SPDR ETF (XLK), QQQE and RSPT have much less exposure to Apple and Microsoft and more exposure to moderately sized tech stocks.
Of course, QQQE and RSPT are different as QQQE owns consumer discretionary and communications stocks like Meta Platforms and Tesla not just information technology GICS sector constituents. Meanwhile, RSPT owns NYSE-listed companies like Fair Issac and Gartner.
Astoria Manages ETFs Too
Astoria takes a sector-neutral, yet equal-weighted approach with the Astoria US Quality Kings ETF (ROE). The ETF, which launched in August 2023 but follows an approach with a long history, owns companies like Cardinal Health, Discover Financial Services, Simon Property Group, and Ross Stores with strong financial profiles. ROE is more diversified at the security level than most quality ETFs around.
The firm also manages the AXS Astoria Inflation Sensitive ETF (PPI), a multi-asset ETF that launched at the end of 2021. While inflation has cooled in 2023, Davi thinks the biggest risk for 2024 is that inflation is reignited. This would lead to rate hikes being priced back into the market. Investors can protect against this risk by owning real assets via PPI. The ETF owns some low-cost ETFs like the SPDR Gold MiniShares (GLDM) and the Vanguard Short-Term TIPS ETF (VTIP), It also owns energy and materials stocks like EOG Resources and Rio Tinto.
Taking on Duration in 2024
The one lone pure-play fixed income ETF on the Astoria Advisors’ list is the Invesco BulletShares 2030 Corporate Bond ETF (BSCU). Last year, Davi had a short-term edition of this high-quality target-maturity Invesco ETF on the list. Now, he believes that extending duration and having exposure to investment-grade bonds makes sense for fixed income exposure. BSCU has a 30-day SEC yield of 5.4% and has an average duration of just under 6 years. If rates are cut as expected, this ETF will benefit.
Tomorrow, December 14 at the VettaFi’s Market Outlook Symposium, Davi will be joined by experts from abrdn, BNY Mellon, Bitwise, Calamos Investments, Diffractive, Goldman Sachs, Invesco, and PIMCO. Join us starting at 11 am for an interview with Jeremy Siegel. And stay for asset managers like Davi diving deeper into various investment styles.
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