U.S. Markets close in 5 hrs 17 mins
  • S&P 500

    +10.01 (+0.31%)
  • Nasdaq

    +82.99 (+0.78%)
  • Russell 2000

    +12.12 (+0.83%)
  • Crude Oil

    -0.48 (-1.19%)
  • Gold

    -14.00 (-0.75%)
  • Silver

    -0.22 (-0.93%)

    -0.0042 (-0.3606%)
  • 10-Yr Bond

    -0.0100 (-1.50%)
  • Vix

    +0.03 (+0.11%)

    -0.0042 (-0.3279%)

    -129.47 (-1.20%)
  • CMC Crypto 200

    +8.24 (+3.78%)
  • FTSE 100

    +4.02 (+0.07%)
  • Nikkei 225

    +116.80 (+0.51%)

We're in the beginning stages of this new cycle: CIO

John Davi, CIO of Astoria Portfolio Advisors, joins The Final Round to discuss the day's market action and how his firm is constructing portfolios in this market.

Video Transcript

MYLES UDLAND: Again, markets under pressure here as we head towards the closing bell. The NASDAQ right now is off some 3 and 1/2%. THE S&P 500 off about 2%. This coming, again, just three trading days after we saw the S&P and the NASDAQ close at record highs.

And joining us now for more on everything going on in the markets is John Davi. He's the Founder and CIO of Astoria Portfolio Advisors. John, thanks so much for joining the program. So let's just start with kind of your overview as you see the setup sitting here today, third day of this-- this sell-off, is this the start of something bigger to you? Or is this kind of an unwind of all the stuff we've seen reported in the last couple days?

JOHN DAVI: You know, I would not be fading momentum yet. I think that there's parts of the secular growth market which are expensive, you know, some individual names, you know, which are crowded, vulnerable, got too expensive. But I think if you look at the big picture, what we're doing at Astoria Advisors is, if you look at the macro data, you've got PMIs that are inflecting higher.

You've got housing data that's improving. If you look at earnings, we've troughed, earnings are inflecting higher. You've got the Fed that's given you basically this embedded put, because they're telling you that they're not going to raise interest rates plus they're doing quantitative easing. So I still think stocks are buy.

You can go to our website, Astoriaadvisors.com. We've been constructive on stocks since late March, and our portfolios have benefited as a result. The one added consensus position that we're doing now is that if you look at what's happened in the last three days, yes, tech has sold off, but economically sensitive sectors of the marketplace are actually outperforming.

So that would be like energy, industrial, materials. And that, to me, is an indication that there's been a change in market leadership. So you know, we were late cycle for-- for many years. Everyone talked about that.

Now, we're a classic early cycle. And then if you look at the performance of energy, small-caps, mid-caps since March, they're leading the market higher. So that's how we're rotating our portfolios to be more cyclically-oriented.

MYLES UDLAND: And when you think about that rotation, John, obviously because of the way so many of the indices that, you know, at least us here in the media are going to be following, with the cap weighting, at least in the NASDAQ and the S&P, that certainly presents a challenge if you have, you know, 8% of the market cap in a leadership position, while the 23% weighting in the five FANG names starts to come under pressure. Do you think that those sorts of distortions might, I guess, create a worse-looking market, perhaps, if that's a way to say it, than actually exists underneath the surface?

JOHN DAVI: You know, it's great on the way up, you know, tech leads, you know, the SPY, the ETF. But on the way down, yeah, you're going to get hurt. So principally, we invest across multiple factors, because the research shows you can get higher up on the fixture frontier when you combine factors in a portfolio, things like quality, you know, small-cap, you know, momentum. So I would-- I mean, as a firm, I can tell you principally we invest across factor ETFs, so we tilt away from market cap. And I like it on days like today and Friday of last week, so.

MYLES UDLAND: And so then you outlined, you know, how we've kind of transitioned into this classic kind of early cycle setup. As you look back and maybe kind of take stock of how we got here through that run-up June, July, and obviously the crescendo we saw through August, what, I guess in your view, was-- was maybe driving that action? And then is it really just sort of a reopening trade, maybe the simplest way to say it, that is going to step in here as we get towards the fall?

JOHN DAVI: You know, good question. I think that, you know, we had a pretty severe, nasty bear market, a pretty nasty recession. And like all other cycles, there's a beginning and the end. And I think we're in the beginning stages of this new cycle.

So if you look at the leading economic indicators, you know, they've inflected off the lows, and they're bouncing higher. Couple that with the Fed put, you know, watch price. Price action is a very, very important indicator, and energy, industrial, cyclical stocks, small-caps, their lead-in.

So I think if you're going to be in the secular growth trade, you've got to be real careful which stocks you buy, because I think some of them have been bid up relentlessly by people that aren't really investment professionals, you know, kind of day traders, gamblers. So you got to really pick and choose, which I don't mind being more active in this kind of market. I do think that you want to be active, as opposed to passive.

And I do think it's a good time for pick stocks. We're not stock pickers per se. We build quantitative macro portfolios of ETFs. Sometimes we use baskets of stocks, but we're not like-- we don't have a view on, like, one stock versus another per se. So I do think you want to be careful, especially because we're in this vulnerable period of the market where, you know, September, October, you know, historically is pretty volatile, so.

MYLES UDLAND: All right, John Davi. Founder, CIO of Astoria Portfolio Advisors. John, thanks so much for joining the program. Great to get your thoughts.

JOHN DAVI: Thank you for having me.