Astoria has been constructive since the rate of inflation materially fell, and earnings troughed last year. Recall that we began using equal-weighted strategies in our ETF-managed portfolios in August 2023. An equal-weighted strategy, by definition, is a constructive tilt. Moreover, we reiterated our constructive views in our annual year-ahead outlook published in Dec 2023, 2024: A New Cycle Begins. We also produced our annual 10 ETFs for 2024 in December.
Why are we bullish? Better margins (due to AI-enhanced productivity + lower inflation), earnings recovery, and an accommodative Fed. We don’t see these variables changing in 2024.
In the past couple of years, the market has dealt with aggressive rate hikes, rampant inflation, fear of recession, and an earnings recession. Those variables have dramatically improved and, in some cases, have completely reversed. Inflation has eased (granted, not conquered), the recession that seemed imminent now appears to have been punted, and we are witnessing an earnings recovery. We watch every economic indicator; many of them are now inflecting higher.
Hence, we entered 2024 more bullish than we’ve been in the last 2 years. We are OW equities, underweight alternatives, prefer credit over rates, and are running the highest beta in years.
Within equities, we prefer US stocks. Our preference is the US quality growth factor. For the first time in years, we are quite constructive on the technology sector. We are utilizing various equal-weighted strategies, which by definition is a constructive view on markets as you are tilted towards midcap stocks (and away from the mega-cap stocks, hereby incurring tracking error).
As you know, we launched a dedicated inflation/real assets ETF model portfolio that exclusively targets industrial, energy, and material stocks (within the equity sleeve). Nowadays, we hear pundits banging the table on buying these sectors to constructively play the market.
Check out our recent media interviews for more context and details about our portfolio construction and positioning:
Best,
John Davi
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