Emily Roland 3.8 8 ideas

Roland states that software companies have produced 30% year-over-year earnings growth, yet the sector is being treated as "oversold" due to macro fears. The market is mispricing the fundamental strength of US tech. Unlike 2022, earnings growth is robust. The sell-off is sentiment-driven, creating a disconnect between price and actual corporate performance. LONG Software and US Growth Tech. Continued rise in long-term yields (due to oil inflation) typically compresses valuations for long-duration growth assets like software.

The US lost 92k jobs, and unemployment rose to 4.4%. Roland notes the bond market is only pricing in one rate cut, which is "wild" given six negative bond reports. Rieder notes real rates are attractive and income is back. A negative payroll print of this magnitude typically forces the Fed to cut rates to support the labor market. While inflation (oil) is a concern, the economic deterioration (job losses) will eventually force a flight to safety in bonds, and current yields (>4%) offer a "cushion" of income while waiting for capital appreciation. LONG duration and aggregate bonds for income and capital appreciation potential on Fed pivot. Stagflation—if oil pushes inflation higher, the Fed may be unable to cut rates despite job losses, causing yields to rise (prices to fall).

The S&P 500 is concentrated and expensive. However, US earnings growth (15%) is far superior to Europe (3%). Investors want US exposure without the valuation risk of the "Mag 7." Mid-caps and Industrials offer "quality cyclical" exposure and benefit from the "roaring 2020s" productivity theme without the extreme multiples of big tech. LONG. Diversification within the US equity market. Economic slowdown hitting cyclicals harder than tech.