Now to talk about this closing bell as Charles Cunningham the chief investment officer of conductor ETFs by Iron Horse, of course Iron Horse reading the closing bell to here at the NYSC.
It's great to see you, Charles and what does it feel like to be down here on the floor of the NYC's great to see you.
We've had a great.
It's always, it's always exciting.
We've been here before, but it never gets old, so the bell is this every Friday.
Yes, I think that we should.
We do ring that bell every Friday, but you've got to come back every Friday.
Indeed.
Tell me where we stand right now from your vantage point in terms of the investing landscape, so.
We primarily focus on international equities, uh, value equities, more on the small cap side, and so from my perspective we're very hopeful that there's a turn that's begun towards international equities away from the US.
So last year international equities outperformed the US for the first time in a while.
This year you've seen international equities hold their own as well, so it's a great start.
We're starting to see value act a little bit better.
Um, we're starting to see small cap act a little bit better, especially in the US, so you take it all.
Into consideration for many, many years valuations have become super stretched when you think about the US versus international, when you think about value versus growth, when you think about small cap versus large cap, maybe historically so the first time we've seen markets like these and relative valuations like these in 25 years since the last tech bubble.
So in that sense things are starting to turn and that's hopeful, but we think it's an incredible opportunity to jump in.
We think when the cycle turns in favor of international equities and value and small cap, the cycle could last 8, 1012 years just like it did in the 2000s.
So we think it's a wonderful opportunity.
We think we're on the bleeding edge of this, frankly.
Where do we stand now when we look at growth versus value on an international level?
Well, like the US, I mean, obviously everybody focuses on the AI trade or the IT trade, and that's been in place and then going back to crypto and then.
The mag 7 trade, etc. etc. for a while in the US, well, the same dynamics are in play when you look at ex US stocks too, so value is pretty historically undervalued relative to its growth counterpart internationally as well, so.
Again, not too dissimilar to what happened 25 years ago, um, and.
Um, I'm a statistical geek, so when we, we think of things in terms of Z score standard deviation, so when you look at value versus growth, you're talking about a market that's stretched to the tune of.
Close to 2 standard deviations in terms of relative evaluation.
So when you see things like that, it means the rubber bands are maybe close to breaking in our favor.
And when that happened again 25 years ago, that kicked off a decade of significant outperformance in our space and that whether you're looking at international only, whether you're looking at global, whether you're looking at US only and so famously between 2000 and 2010 or so, the S&P 500 was down approximately 1.5 or 2% a year.
The space that we operate in was upward up approximately 9% a year, so there was an incredible differential or delta between those performances.
What about small versus large caps?
The exact same dynamic.
I'm like a broken record.
So, again, in the late 90s and going to the 2000s, those three vectors were all operating in a similar fashion um and they all kind of intersect in, in a certain way.
So right now along the three vectors we operate on, if you think international versus US.
Value versus growth obviously and small cap versus large cap small cap might be more undervalued relative to large cap than the other than the other vectors are.
So in the case of small cap, you start to see the Russell maybe act a little bit better here in the US that momentum hasn't carried completely over to international yet, but you're talking about valuation differentials internationally between small cap and large cap that are as large as you've seen in the past 25 years.
What are you advising clients right now?
Um, come our way, you know, so I would say, you know, if we talk to people and we're not really talking our book or talking our portfolio, but if we're being honest, we'd say it's a perfect time to shift portfolio resources or portfolio capital towards these sectors, you know, more broadly whether you're talking international or US, uh, we would recommend equal weight.
Index exposure, so to speak over cap weight.
Obviously the markets are extremely concentrated.
They're significantly concentrated in the US, so you think about the top 10 names in the S&P 500, for instance, comprising upwards of 30 to 35% plus of index exposure.
So we think that's a little heady.
That didn't end well for investors 25 years ago when the tech bubble finally burst.
We think we're going to have a similar dynamic this time so.
If you have more equal weight exposure, if you're tilting more towards small cap, whether you're talking about US or international, either way, in value versus growth, and again that's just because the rubber bands are so stretched.
All right, Charles Cunningham, he's chief investment officer of conductor ETFs by Iron Horse.
Charles, thank you.
Thank you very much.
Happy weekend.
Happy Friday, yes, very true.
