John Davies

Buy SPY as a contrarian recovery play; sentiment is as depressed as Liberation Day lows, Wall Street strategists cutting targets (historically a contrarian buy signal), EPS up 14% while P/E compressed 17%, and prediction markets still pricing economic expansion.

Buy gold as a hedge against accelerating dollar debasement; author has held gold in multi-asset portfolios since 2017 and launched a dedicated Real Assets strategy in 2021 for this thesis, with conviction intensifying in 2026.

Emerging markets, including EM debt, offer a margin of safety and global diversification tailwind given a strong US economy. The firm likes emerging markets quite a bit.

Broad-based commodities (via CER) are trending due to higher inflation and the Middle East conflict. Commodities can lead for multi-year periods, and we are roughly five years into an inflation cycle that could continue for another 2-3 years, making commodities an attractive diversifier.

Real assets (via the PPI fund) provide inflation protection and have outperformed the S&P 500 by 25% since 2021. Real assets have been the leading asset class in six of the last seven years. Inflation is structurally higher and unlikely to return to 2% soon, supporting a long-term allocation to real assets.

Rotate incrementally into small-cap IWM as the AI vs. non-AI earnings growth gap is expected to narrow into 2027, reducing the premium justifying mega-cap concentration; YTD IWM +17% validates the thesis.

Add mid-cap exposure via MDY as the AI earnings growth gap narrows into 2027, reducing the justification for large-cap concentration; YTD MDY +12% supports the rotation.

"Some of these sectors like industrials, energy materials sectors that you know, can benefit from like an elevated, you know, let's say, stagflation environment..." A strong US economy fueled by tax cuts and tariff cuts, combined with an elevated stagflation environment, creates a perfect storm for hard assets and cyclical sectors. Industrials benefit from reshoring and protectionist tariffs, while energy and materials possess inherent pricing power when inflation runs hot alongside stagnant broader growth. LONG industrials, energy, and materials as a strategic play on a resilient US economy and persistent stagflationary pressures. A severe recession or a sudden deflationary shock would destroy demand for commodities and severely crush cyclical equities.

"Some of these sectors like industrials, energy materials sectors that you know, can benefit from like an elevated, you know, let's say, stagflation environment..." A strong US economy fueled by tax cuts and tariff cuts, combined with an elevated stagflation environment, creates a perfect storm for hard assets and cyclical sectors. Industrials benefit from reshoring and protectionist tariffs, while energy and materials possess inherent pricing power when inflation runs hot alongside stagnant broader growth. LONG industrials, energy, and materials as a strategic play on a resilient US economy and persistent stagflationary pressures. A severe recession or a sudden deflationary shock would destroy demand for commodities and severely crush cyclical equities.

"Some of these sectors like industrials, energy materials sectors that you know, can benefit from like an elevated, you know, let's say, stagflation environment..." A strong US economy fueled by tax cuts and tariff cuts, combined with an elevated stagflation environment, creates a perfect storm for hard assets and cyclical sectors. Industrials benefit from reshoring and protectionist tariffs, while energy and materials possess inherent pricing power when inflation runs hot alongside stagnant broader growth. LONG industrials, energy, and materials as a strategic play on a resilient US economy and persistent stagflationary pressures. A severe recession or a sudden deflationary shock would destroy demand for commodities and severely crush cyclical equities.