Berkeley Belknap 1.4 4 ideas

Franklin Templeton notes a "regime shift" where earnings growth is broadening beyond the "Mag 7." The Russell 1000 Growth is down YTD while Value is up. The macro backdrop remains strong (GDP growth, spending), but valuations in Mega Tech are stretched. Capital is rotating into sectors with lower multiples that benefit from a resilient economy (Energy, Cyclicals, Small Caps). LONG Cyclicals, Energy, and Value to capture the rotation trade. A sharp economic slowdown or recession would hurt cyclicals more than quality tech.

The long end of the Treasury curve is under pressure. Belknap expects the Fed to cut less than the market expects (2 cuts max). There is a "huge amount of Treasury issuance" competing with massive corporate bond issuance from Hyperscalers (AI capex financing). Supply overwhelms demand. Additionally, Fed nominee Kevin Warsh may reduce forward guidance, increasing volatility and term premiums. SHORT Duration / Long-End Treasuries (favoring short duration like T-Bills). A sudden recessionary shock drives a flight-to-safety rally in long bonds.