logo
The market just gave investors a gift. Here's how not to blow it, according to investing experts

The market just gave investors a gift. Here's how not to blow it, according to investing experts

CNBC18-05-2025
The stock market has come full circle from its April lows, with all of the losses suffered now recovered. For investors who long defied warnings about being over-exposed to U.S. stocks, especially with the dominant position of a handful of tech stocks in the S&P 500, the rebound in portfolios is a good opportunity to do what many had neglected to do in the past: diversify into international equities and other asset classes.
"You got a gift from the market gods," said David Schassler, VanEck head of multi-asset solutions, on last week's "ETF Edge."
"We want to see people diversify, diversify internationally and into real assets as well, specifically gold and if you're into it, also diversify into bitcoin," he said.
Some investors already got the message early in 2025, as the period from January to April saw most major markets around the globe leave U.S. stocks behind in performance. Vanguard's Total International Stock Index ETF (VXUS), as an example, has net inflows of over $6 billion this year, according to ETFAction.com, which places it No. 11 among all ETFs in flows this year. But to put that into perspective, Vanguard's S&P 500 ETF (VOO), is now over $63 billion in inflows this year.
In fact, VOO is on pace to blow away the record for annual inflows it set just last year.
As investors who bought the dip in U.S. stocks are rewarded, ETF experts say those who have stuck with an S&P 500-heavy tilt and didn't enjoy the drawdown experience of April should still use this opportunity to look at portfolio balance. "If your portfolio is predominantly U.S. [stocks], we want to see you diversity in international as well as emerging markets," Schassler said.
Investing icons of the recent past, from Warren Buffett to Jack Bogle of Vanguard Group, broadcast a message that focusing on U.S. stocks over the long-term is the best bet. Bogle, in particular, often said the S&P 500's multi-national corporate makeup delivers plenty of overseas revenue itself. But even Buffett has been lightening up on some big U.S. market positions, while adding to more of his more recent bets on Japan.
"We're not anti-U.S., but just saying if you are predominantly invested in the U.S., you probably want to invest outside as well," Schassler said.
Valuation in the S&P 500 remains a primary concern for experts who say this is a good time to make sure a portfolio is properly diversified. According to Schassler, with the recovery in stocks, the U.S. market is "priced richly."
He added that even as recession risks have declined after the U.S.-China temporary trade truce, the risks remain higher than the historical baseline. "We're not calling a recession, but risk is high," he said on "ETF Edge."
The price to earnings ratio in U.S. stocks reinforces the message that there is "lots of value overseas," he added.
In Schassler's view, the big shift in U.S. government policy on a global basis is also a secondary catalyst for more diversification. As the world becomes more bifurcated, and countries are forced to move forward on their own and push their own growth, investors are in a backdrop that favors more growth from lower valuation international stock markets, he said.
Todd Rosenbluth, head of research at VettaFi, said on "ETF Edge" that this year has shown more investors embracing international diversification, though he added that we are "not fully seeing it" in the market yet. He also says investors should use this moment to be mindful of the concentration with their U.S. stock holdings.
"The flows have certainly been favoring the U.S. and investors been buying the dip are being rewarded," Rosenbluth said. "We've seen growth equities rebound much more strongly, those tech and consumer discretionary oriented sectors," he said.
The iShares S&P 500 Growth ETF (IVW) is up nearly 18% in the past month, while the iShares S&P 500 Value ETF (IVE) is up about 8%, according to ETF Action.
Rosenbluth says a good way to deal with the valuation and concentration risk within a U.S. portfolio is to invest in a "quality" stock funds, such as VictoryShares' Free Cash Flow ETFs.
"We might not see this rally continue on the growth side so you want to have balance in the portfolio," Rosenbluth said.
Both ETF experts said as global trade sentiment improves, investors should look at China and India as part of any international diversification plan.
Schassler said China is aggressively stimulating its economy, and India is one of the best growth stories in the world "like China 20 years ago," he said. "Having China and India exposure makes sense," he said.
Rosenbluth said there was strong interest in China at the beginning of the year, and in ETFs such as KraneShares' CSI China Internet ETF (KWEB), but he described that momentum as now "faded."
KWEB is still a good option for investors interested in China in this environment, Rosenbluth said, because it is still one of the largest of the China-focused growth-oriented ETFs, and is less likely to be negatively impacted from China tariffs. It is a "China-only" story as opposed to a broader Chinese stock fund with exposure to multi-national businesses. KWEB is up 14% of the past month, and in the past week it saw close to $100 million in flows, compared to net outflows over $800 million during the prior three months, according to ETF Action.
On India, there are multiple options for investors, including the iShares MSCI India ETF (INDA), as well as Van Eck's Digital India ETF (DGIN).
Schassler said the structural growth story in India is the reason to invest. "You've got a huge population, it's tech savvy, well-educated, and the government is supporting the economy, so everything lines up there for a growth story," he said.
Disclaimer
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Market complacency is 'through the roof': Portfolio manager
Market complacency is 'through the roof': Portfolio manager

Yahoo

time15 minutes ago

  • Yahoo

Market complacency is 'through the roof': Portfolio manager

The S&P 500 (^GSPC) notched its fifth straight record close this week. But The Free Markets ETF (FMKT) co-portfolio manager, Michael Gayed, who is also publisher of The Lead-Lag Report, is warning that market complacency is rising. He breaks down some of the signs he's seeing in the video above. To watch more expert insights and analysis on the latest market action, check out more Market Domination here. So, I think the complacency is through the roof. I think if you look at call option volume, you can clearly see that when you look seasonality, you're pretty much at the point in the calendar where historically the VIX bottoms and you tend to see volatility pick up into September. Um so it's interesting to see that we're in this sort of low volatility in quotes melt up, but small caps, yeah, they're up 1%, but they're not at the prior highs and things are still I think from divergence perspective worth noting. Um there are going to be selective winners, but I do think you're probably in for a risk on, risk off type of sequence. Maybe I'm biased in saying that because I have three funds that try to play off of that, but but the seasonality does seem to favor that. That's a short-term dynamic. The free market ETF, which is focused on the regulatory plays, that's a longer-term dynamic and I think that's a much underappreciated aspect of what's to come. So, are you, would you be looking for in the near term, Mike, would you be looking for a pullback? Most likely, yeah. And do you think investors step in and buy that pullback? That's been the Pavlovian response. It's like, buy the dip, buy the dip. It is, it is remarkable to me how with conviction retail comes in and when I say conviction, I'm talking about leverage ETFs, call option volume buying that you see activity that you're seeing. So, there is, um everyone is trained to do the same thing. Now at some point that's going to fail, right? It's like at some point the dip becomes not a dip, but something much more systemic. I don't know when that is. I've been wrong in trying to think the next one would be the one, right? But, um regardless look, we know markets tend to go up over time. It's just about what time frame you want to play. Related Videos Mortgage rates steady, Trump says no capital gains on home sales Trump's rare Federal Reserve visit raises 2 questions Keurig Dr Pepper CEO on Q2 beat, coffee sales, cane sugar German Exporters Can Live With 15% Tariff, Ifo Says Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data

S&P 500 fresh record high, Trump & Powell, Intel: 3 Things
S&P 500 fresh record high, Trump & Powell, Intel: 3 Things

Yahoo

time28 minutes ago

  • Yahoo

S&P 500 fresh record high, Trump & Powell, Intel: 3 Things

Here are three headlines investors are watching on Friday, July 25. The S&P 500 (^GSPC) notched its tenth record high in the last 19 trading sessions at Thursday's market close. US President Trump visited the Federal Reserve building, which is under renovation, with Fed Chair Jerome Powell. Intel (INTC) stock falls after reporting earnings, with CEO Lip-Bu Tan highlighting cost-cutting efforts. To watch more expert insights and analysis on the latest market action, check out more Morning Brief here. US stock futures little changed this morning after the S&P 500 closed out at a record high. That marks the 10th record close in the last 19 trading sessions for the benchmark index. But some on Wall Street are warning on the rally. Bank of America's Michael Hartnett saying the risk of a bubble's on the rise amid an influx of retail trading and increased liquidity. Plus, President Donald Trump downplayed his clash with Federal Reserve Chairman Jerome Powell. Uh that was over the cost of the Federal Reserve's renovation. The President touring the facility with the chairman, maintaining there was what he said was no tension with the Fed chief. He indicated the problems with the project probably weren't reason enough to fire the central bank head. Trump's visit marked the first time in nearly two decades that a president has visited the Federal Reserve. And Intel shares are falling in pre-market trading this morning, after its CEO sparked concerns he's more focused on cost cutting than restoring the chipmaker's technological edge. In its latest earnings, the company said it'll cancel some factory projects and take a more conservative approach to future spending. The CEO called the investments begun under his predecessor, excessive and unwise. Related Videos Homebuilding sector playbook: 4 top stock picks Why consumer stocks are falling out of favor on Wall Street Procter & Gamble, Carvana, Boston Beer: Trending Tickers Trump Is on the Mind of the FOMC, Goldman's Kaplan Says Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

Wall Street's winning week ends with more records for stocks
Wall Street's winning week ends with more records for stocks

Los Angeles Times

timean hour ago

  • Los Angeles Times

Wall Street's winning week ends with more records for stocks

NEW YORK — Stocks capped another strong week with more records on Friday. The S&P 500 rose 0.4% to set an all-time high, the fifth time it did so this week. The Dow Jones Industrial Average climbed 208 points, or 0.5%, and the Nasdaq composite added 0.2% to its own record set the day before. Deckers, the company behind Ugg boots and Hoka shoes, jumped 11.3% after reporting stronger profit and revenue for the spring than analysts expected. Its growth was particularly strong outside the United States, where revenue soared nearly 50%. Edwards Lifesciences rose 5.5% after likewise topping Wall Street's expectations for profit in the latest quarter. It said it saw strength across all its product groups, and it expects profit for the full year to come in at the high end of the forecasted range it had given earlier. They helped offset a drop of 8.5% for Intel, which fell after reporting a loss for the latest quarter, when analysts were looking for a profit. The struggling chipmaker also said it would cut thousands of jobs and eliminate other expenses as it tries to turn around its fortunes. Intel, which helped launch Silicon Valley as the U.S. technology hub, has fallen behind rivals like Nvidia and Advanced Micro Devices while demand for artificial intelligence chips soars. All told, the S&P 500 rose 25.29 points to 6,388.64. The Dow Jones Industrial Average climbed 208.01 to 44,901.92, and the Nasdaq composite added 50.36 to 21,108.32. The pressure is on companies to deliver solid growth in profits in order to justify big gains for their stock prices, which have rallied to record after record in recent weeks. Wall Street has zoomed higher on hopes that President Donald Trump will reach trade deals with other countries that will lower his stiff proposed tariffs, along with the risk that they could cause a recession and drive up inflation. Trump has recently announced deals with Japan and the Philippines, and the next big deadline is looming on Friday, Aug. 1. Besides potential trade talks, next week will also feature a meeting by the Federal Reserve on interest rates. Trump again on Thursday lobbied the Fed to cut rates, which he has implied could save the U.S. government money on its debt repayments. Fed Chair Jerome Powell, though, has continued to insist he wants to wait for more data about how Trump's tariffs affect the economy and inflation before the Fed makes its next move. Lower interest rates can help goose the economy, but they can also give inflation more fuel. Lower rates also may not lower the U.S. government's costs to borrow money, if the bond market feels they could send inflation higher in the future. In that case, lower short-term rates brought by the Fed could actually have the opposite effect and make it more expensive for Washington to borrow money over the long term. The widespread expectation on Wall Street is that the Fed will wait until September to resume cutting interest rates. In the bond market, Treasury yields held relatively steady following Trump's latest attempt to push Powell to cut interest rates. Trump also seemed to back off on threats to fire the Fed's chair. 'To do that is a big move, and I don't think that's necessary,' Trump said. 'I just want to see one thing happen, very simple: Interest rates come down.' If Trump fired Powell, he'd risk a freak-out in financial markets by raising the possibility of a less independent Fed, one unable to make unpopular choices necessary to keep the economy healthy. The yield on the 10-year Treasury eased to 4.38% from 4.43% late Thursday. The two-year Treasury yield, which more closely tracks expectations for what the Fed will do, held steady at 3.91%, where it was late Thursday. In stock markets abroad, indexes slipped across much of Europe and Asia. Stocks fell 1.1% in Hong Kong and 0.3% in Shanghai. U.S. Treasury Secretary Scott Bessent has said he will meet with Chinese officials in Sweden next week to work toward a trade deal with Beijing ahead of an Aug. 12 deadline. Trump has said a China trip 'is not too distant' as trade tensions ease. Choe writes for the Associated Press.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store