The Meb Faber Show - Better Investing
Que Nguyen, Research Affiliates – Walking the Tightrope: High Valuations in an Inflationary Landscape | #505
Oct 25, 2023
Que Nguyen, CIO of Equity Strategies at Research Affiliates, discusses stretched valuations, rising interest rates, and inflation as potential challenges for investors. She highlights opportunities in the U.S. market and explores topics like fundamental indexing, the Magnificent Seven, and the outlook for the dollar. The podcast also covers inflation, rising interest rates' impact on different markets, retirees' portfolio allocation, and the concept of investing in quality.
46:35
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Quick takeaways
- Investors should seek alternatives to cap-weighted indexes for greater diversification and to mitigate higher risks caused by the concentration in the Magnificent Seven stocks.
- Value investing is currently undervalued, but investors should focus on high-quality stocks within the value universe, considering wise capital allocation, low distress levels, and consistent business strategies for stability and attractiveness.
Deep dives
Narrowing indexes increase risks for investors
The Magnificent Seven stocks, which have accounted for about 50% of the increase in the S&P 500 this year, are causing a significant narrowing of the indexes. This means that investors who own the S&P 500 are increasingly exposed to these stocks, which leads to less effective diversification and higher risks. As a result, investors are seeking alternatives to the cap-weighted indexes in order to achieve greater diversification.
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