Intro

In this episode of Excess Returns, we sit down with Adrian Helfert of Westwood to discuss how investors should be thinking about portfolio construction in a market shaped by artificial intelligence, high levels of concentration, shifting interest rate dynamics, and evolving economic signals. The conversation covers how AI-driven capital spending is changing return profiles across markets, why traditional investing rules are breaking down, and how investors can balance growth, income, and risk in an uncertain environment. Adrian shares his framework for understanding return drivers, his views on market concentration and valuation, and how to think about diversification, macro risk, and income generation going forward.

Main topics covered
• How Westwood frames portfolio construction around capital appreciation, income, and event-driven returns
• Why AI spending is both a major opportunity and a growing existential risk for large companies
• The sustainability of market concentration and what it means for future returns
• Whether higher interest rates really hurt growth stocks the way investors expect
• How massive data center and AI capital expenditures could translate into productivity gains
• The case for market broadening beyond the Magnificent Seven
• Why traditional recession indicators have failed in recent cycles
• How inflation, labor markets, and Federal Reserve policy interact today
• Rethinking the classic 60/40 portfolio and the role of private markets
• Using covered calls and active income strategies to manage risk and generate yield

Timestamps
00:00 Introduction and near-term opportunities versus long-term risk
02:40 Capital appreciation, income, and event-driven investing framework
06:30 Have markets structurally changed to support higher returns
09:30 Intangible assets, AI, and margin expansion
10:20 The scale of AI and data center capital spending
13:00 Productivity gains and return on investment from AI
16:00 AI as both opportunity and risk for companies
19:30 Market concentration and diversification concerns
23:30 Will market leadership eventually broaden
25:30 Growth stocks, duration, and interest rates
29:30 International diversification and global investing
33:30 Why recession indicators have failed
39:00 Inflation outlook and Federal Reserve policy
46:00 Rethinking the 60/40 portfolio
53:00 Enhanced income strategies and covered calls
59:00 One investing belief most peers disagree with