Tim Urbanowicz

The next big wave of the AI trade, where significant money can be made, is within emerging markets. The valuation gap between EM and the US is at multi-decade highs, providing a strong entry point. The EM index is heavily weighted toward South Korea and Taiwan, key AI players whose valuations have not risen as much as in the US, leaving substantial runway for outsized gains.

Small caps have had a stellar run but the pace of outperformance versus large caps will moderate through year-end. The AI infrastructure tailwind has been halved after the Russell 2000 rebalance (from 15% to 7% of the index), and valuations are much less attractive than at the start of the year. Going forward, small caps need a cyclical growth story and an interest rate tailwind; the market is mispricing a Fed hike, and a Fed on hold with rate hikes pushed out would be positive for small caps given their high floating-rate debt exposure.

DDFZ is a 15% dual directional ETF that provides investors with a defined payoff structure: if the market declines up to 15%, the ETF gains up to 15%; if the market rises, it participates up to a cap around 10-10.5%. This simplifies options-based risk management for investors who do not want to construct such trades themselves, offering built-in risk management and potential alpha when markets fall.