Tiffany McGhee on Investing in Resilient Market, VRT Hidden AI Strength

Market leadership is broadening beyond the Magnificent 7 into small caps, value, and emerging markets. Investors should diversify using a core-satellite approach with passive ETFs and active strategies, including defensive equities and private credit. AI exposure should be diversified across creators, builders, and adopters.

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Pivotal Advisors 4.0
Management Consulting
Tiffany McGhee 6.5

Tiffany McGhee on Investing in Resilient Market, VRT Hidden AI Strength

US equities; International equities

ndx

The guest recommends owning AI creators (Nvidia, Microsoft, Amazon, Alphabet) as part of a diversified AI strategy, implying continued but moderated upside for Nasdaq-heavy names.

rut

Small cap stocks are up 21% year-to-date, outperforming other sizes.

yields

Small caps have performed well despite interest rate uncertainty, suggesting yields are not expected to move sharply in either direction in the near term.

Diane King Hall

The Magnificent 7 are underperforming this year, being called the 'lag 7'. Investors previously felt they had to be in those stocks for momentum, but that is no longer the case.
Tiffany McGhee

Market leadership is broadening across asset classes, sizes, and styles. Year-to-date, emerging markets are up 29%, value is up 16% vs growth at 4.5%, and small caps are up 21%. Diversification is essential.
Diane King Hall

Small cap momentum has been surprising given interest rate worries and historical head fakes.
Tiffany McGhee

Nothing surprises me; leadership always rotates historically. Investors need diversified portfolios to take advantage of this and build in volatility.
Diane King Hall

Owning an S&P 500 index fund is not truly diversified because it is tech-dominated. Investors need exposure elsewhere.
Tiffany McGhee

US equities are 60% of global market cap, so a traditional 60/40 portfolio with global exposure still relies on a handful of US companies. Use a core-satellite approach: passive ETFs for broad market and low fees, plus active strategies for inefficient areas like small caps and emerging markets.
Diane King Hall

Asked about specific AI-related stock picks: Vertiv and Broadcom.
Tiffany McGhee

Invest in AI through a diversified strategy: own the creators (Nvidia, Microsoft, Amazon, Alphabet), the builders (Vertiv, Eaton for data center infrastructure), and the adopters (companies using AI to improve productivity).
Diane King Hall

What is the biggest worry for your clients?
Tiffany McGhee

If I've done my job, they have no worries. But clients (institutions, foundations) are stressed about budget cuts and want portfolios to reflect their mission. Volatility is a concern for all. Some are skittish about private markets, but private credit is doing well.

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