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It's been a volatile week for the major US indexes (^DJI,^GSPC, ^IXIC) after July's jobs report stoked investors' recession fears. Pointwealth Capital Management founder and CEO Sandra Cho joins Wealth! to break down how you can best manage your portfolio and navigate the market in periods of volatility.
"We've been used to very low volatility. And all of a sudden, when those the unemployment numbers came out and jumped from 4.1 to 4.3%, the markets definitely reacted. That said, we haven't even really had a correction. Market is down about 6.5% from the high... One of the best things to just know in your heart is that there is going to be volatility in the markets and to accept it, and then just lean on that diversification. So it's a good time to rebalance," Cho explains.
She points out that most investors are slightly overweight stocks since they had an explosive run-up this year.
She expects the market rotation away from the Magnificent Seven to continue at least over the next few months as the Russell 2000 small-cap index (^RUT) picks up steam. She also expects the utilities (XLU), real estate (XLRE), and healthcare sectors (XLV) to outperform after a year of weakness.
It's been a volatile week for the markets. So, we want to talk about how you should view this week's moves when it comes to your own portfolio. Here to help, we've got Sanju Cho, who is the Point Wealth Capital Management founder and CEO. Great to have you on here with us. So, as we're trying to kind of take a deep breath, and we're seeing the major averages at least up pretty handedly here as of right now, we're still trying to erase some of the consecutive declines that we had seen. So, what is perhaps the point of calm that you're telling even your own clients right now?
Thanks for having me. Yes, I mean, it has been a kind of a whirlwind of a market. We've been used to very low volatility, and all of a sudden when those unemployment numbers came out, and jumped from 4.1 to 4.3, the markets definitely reacted. That said, we haven't even really had a correction. Market is down about 6 and 1/2 percent from the high, and what I'm telling our clients, and what we're saying is, look, we've talked about this. One of the best things to just know in your heart is that there is going to be volatility in the markets, and to accept it, and you know, and then just lean on that diversification. So, it's a good time to rebalance. Most people are now slightly overweight stocks because stocks have had such a run-up, AI stocks in particular large-cap growth. So you really definitely want to make sure that you rebalance. You want to make sure you have a financial plan because if you have that financial plan, you're able to look a mile out instead of focusing on the small bumps in the road right now.
With that in mind, you mentioned diversification. You know, for portfolios that are perhaps over-indexed on the MAG 7 trade as either annex to the theme of generative AI or something else within that MAG 7 kind of profile, you know, what are you sensing right now? Is there rotation that you're seeing out of MAG 7 or where is that diversification kind of leading people who had been over-indexed in MAG 7 to kind of go into?
Yes, if you've been in the MAG 7, if you've made that play with the AI stocks, good for you, there's been a huge run-up. That said, at what point do you start taking those chips off the table, and cashing them in? So, you know, like you said, we have been seeing a rotation, and you know, we've been seeing that you look at the NASDAQ, you look at when there was that jump in the VIX, and you saw the NASDAQ really go down more than say some of these more value oriented stocks. That's basically, you know, what we are telling our clients is that there's a reason why you were diversified, there's a reason why we didn't have you 100% in NVIDIA, right? So, we are seeing that rotation. We're seeing it even now though the NASDAQ has jumped today. We still believe that that rotation is going to continue over the next few months, and you know, possibly even longer where you see the Russell small cap kind of coming up, you see the unloved sectors like utilities and real estate, and healthcare that didn't do well last year really kind of come up over the last month and outperform relative to those AI MAG 7 stocks.
Since you mentioned AI, we got to talk about the poster child of AI right now, that is NVIDIA. Do you expect that to be the bellwether that it has been in earning seasons past?
NVIDIA is a great, strong company, and they've got a 10-year jump on their competitors. That said, you know, NVIDIA and a lot of other AI and tech large-cap growth companies have had to put a lot of investment into AI that they haven't necessarily seen the fruition in revenue yet. So, do I think it's going to go up? It really depends on your timeline. If you're talking about 10 years out, you know, yeah, why not perhaps. But, if you're talking about over the next year or so, how can it really maintain the kind of growth that it has had, you know, in the past year and a half? I think that's going to be difficult.
Certainly. Sanju Cho, who is the Point Wealth Capital Management founder and CEO, thanks so much for taking the time here.
Thank you.
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This post was written by Melanie Riehl