Name: Market Rally Not Over Says Fund Manager; These Sectors Have Most Upside | Chip Rewey
Uploaded: 2025-07-22T23:16:31+00:00
Duration: 2387 s

Speakers

Chip Rewey — CIO, Rewey Asset Management

Summary

Fund manager Chip Rewey argues recession fears are overblown and sees roughly 1.4% U.S. GDP growth without needing Fed rate cuts. He expects market leadership to broaden from mega-cap tech toward actively selected small/mid-caps, semiconductors, aerospace/defense, and banks. He views tariffs as a reversible, self-induced risk rather than a systemic crisis and sees cap-weighted S&P 500 exposure as less attractive.

Chip Rewey says recession fears are overblown and the economy remains moderately healthy.
He expects around 1.4% GDP growth and does not see a need for Fed cuts now.
He favors rotation from the Mag7/S&P into small/mid-caps via active stock selection, not ETFs.
He is bullish semiconductors and the lagged small-cap semiconductor capex supply chain.
He likes aerospace/defense on military spending needs and commercial aerospace backlog.
He likes banks and regional banks on stronger balance sheets, buybacks, and potential M&A easing.
He views tariffs as self-induced and reversible, limiting systemic risk.
He sees cap-weighted S&P 500 and mega-cap tech as overvalued and likely plateauing.

Ideas

Chip Rewey CIO, Rewey Asset Management 3:17

AI is powerful productivity megatrend

Chip is a long-term believer in AI as a transformative productivity megatrend, comparing it to and saying it could be more powerful than the internet boom. He expects AI to create productivity gains across the economy, benefiting data-center chip companies early and many down-cap companies that feed or use AI, including semiconductor equipment suppliers he owns.

Chip Rewey CIO, Rewey Asset Management 6:01

Cap-weighted S&P is concentrated and plateauing

Large-cap tech looks overvalued, and while he does not expect a crash, he thinks the prior 20-30% compounding pace is unlikely to continue due to law of large numbers, implying a sideways/plateau period. The S&P 500 is market-cap weighted, with the top 10 names over 30% of the index, so investors are effectively buying a handful of mega-cap names rather than 500 stocks. With QE and COVID-era government support gone, he argues against simply buying and holding the cap-weighted index and sees better opportunities by looking outside the Mag7/S&P.

Chip Rewey CIO, Rewey Asset Management 6:56

Rotate into actively picked small/mid-caps

Small and mid-cap stocks have lagged large caps since QE started and were further punished by tariff and recession uncertainty because larger companies have stronger balance sheets. If growth stabilizes near 1.4% without a hard recession and government market support fades, investors should rotate out of the Mag7/S&P into cheaper small and mid-caps. He prefers active stock selection over ETFs down cap because small-cap ETFs have poor liquidity and can contain non-earners or melting businesses, while active work can avoid bad balance sheets and find under-covered names. Even a 1% S&P rotation into Russell 2500 Value or Russell 2000 Value would require buying a large percentage of those indices.

Chip Rewey CIO, Rewey Asset Management 6:56

Rotate into actively picked small/mid-caps

Chip Rewey CIO, Rewey Asset Management 21:26

Lagged semiconductor capex cycle should reaccelerate

The semiconductor capital-equipment cycle has been sideways for years, with weak spending by customers of large equipment suppliers such as Lam Research and Applied Materials. If AI demand is real, wafer starts and capacity for communications, power, processing, and edge AI devices should eventually pick up, pulling small-cap semiconductor capex and supply-chain names higher. Many of these smaller suppliers are flat-to-down YTD, have net cash and strong balance sheets, and can be held through a two-to-three-year cycle.

Chip Rewey CIO, Rewey Asset Management 25:22

Defense spending stays strong

Defense spending should remain strong even if peace breaks out because stockpiles are depleted from Ukraine and other conflicts, militaries need to reconfigure for drone warfare and anti-missile/Iron Dome needs, the big beautiful bill includes $150 billion of war-related spending, NATO's target has shifted toward 3.5% of GDP for procurement plus 1.5% for infrastructure, and Israel and others need to replenish. This creates good pull-through across the aerospace and defense supply chain.

Market Rally Not Over Says Fund Manager; These Sectors Have Most Upside | Chip Rewey

Summary

Ideas

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