Broker Check

In the long run, investing based on the facts presented will ultimately be rewarded

June 30, 2023

The Wealth Alliance boss, Robert Conzo, spoke on Tuesday about the overperformance of the technology stocks so far this year. He said that investors shouldn't keep expecting dramatic returns from Big Tech going forward. He futher said, “Equity investors should turn away from the mega-cap Big Tech giants that have started the year on such a tear - and diversify their portfolios toward value stocks instead.”

A small handful of stocks – including Nvidia, Meta Platforms, and Tesla – have been responsible for nearly all benchmark indices' gains in 2023, with the S&P 500 up 13% and the Nasdaq Composite jumping 27% year to-date. "Forget the FAANG stocks or MAG 7 stocks – The Magnificent Seven," he told Reuters, referring to Nvidia, Meta, Tesla, Apple, Amazon, Microsoft, and Google parent Alphabet. "Chasing anything rising at those type of growth rates is a problem," Conzo added. "So where do you put money to work? You put money to work where it's not doing all that well – like value."

Several strategists have expressed a similar viewpoint to Conzo on Tesla's stock, which has been surging non-stop for months, with banks including Goldman Sachs and Morgan Stanley calling for investors to start selling some of their shares in order to take profits from the rally. It's "time to again, rebalance," Conzo said. "Take some profits off the table on growth – get it to value." Value investors seek out stocks that they believe are underpriced, whereas growth investors look to snap up shares from companies in rapidly-expanding sectors like tech.

The first of those trading strategies beat the market in 2022, with tech and other growth stocks plummeting as the Federal Reserve ramped up its interest-rate hiking campaign. But growth names have roared back this year, a combination of the expectation that the Fed will soon slash interest rates and a massive surge of interest in ChatGPT and artificial intelligence tech.

Since I have always believed that the Fed is nowhere close to “slashing” interest rates, I have remained defensive with most of our money in the value stocks and international. I believe going forward, this approach will be rewarded. Stay the course as we invest according to what the economy and Fed are handing us. There are times that we are out of tune with the trend, but when we are, we are in tune with the history, the economy, and the Fed. You should never invest just based on momentum and trends. In the long run, investing based on the facts presented will ultimately be rewarded.

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