Robust Financial Information Offers Motive to be Constructive on Markets

2024 has marked a pivot of financial circumstances that buyers should contemplate.

Over the previous two years, we noticed rampant inflation, fast fee hikes, adverse actual charges, an earnings recession, tight company steadiness sheets as wages elevated and a recession that by no means manifested.

What has modified? We observe extra strong financial progress, optimistic actual charges, potential fee cuts and a possible shift in market management.

These two environments require two very completely different portfolios. Astoria is now extra constructive to start out 2024 than we’ve been within the final couple of years. We entered this yr chubby equities, significantly U.S. equities. We proceed to lean on high quality (QUAL, DGRW, and so forth.).

We imagine market broadening will proceed and finally turn into extra strong. Astoria holds that managing danger by diversifying away from extremely concentrated passive funds is prudent. This doesn’t imply we don’t personal them; nonetheless, the focus continues to develop, which issues us. We diversified danger in our portfolios by allocating 1/3 to equal-weight, 1/3 to market-cap-weight, and 1/3 to quant/good beta.

Internationally, we’re constructive on Japan. We see sturdy earnings revisions, excessive progress estimates, sturdy worth momentum, low cost relative valuations, enticing EPS progress, GDP progress potential, and improved company funds. DXJ is an ETF that expresses this view.

Concerning mounted revenue this yr, we’re barbelling corporates, munis, and Treasurys. Astoria is impartial on length vs. the benchmark. We’ve additionally begun buying MBS (SPMB). We’ve diminished our publicity to negatively correlated options like BTAL. We proceed to make use of our rate-sensitive / actual property technique and gold (GLDM) in our portfolios.

High ETF Picks:

• DXJ: Robust earnings revisions and worth momentum, excessive progress estimates, and enticing valuation.
• QGRO: It has carried out impressively with out taking excessive focus danger within the Magazine 7. The biggest holding is Reserving Holdings (3.09%). Solely 3 Magazine 7 shares in its prime 10 holdings make up 8.09% (As of March 11, 2024)
• SPMB: Company MBS have increased spreads than corporates, their YTM is enticing, and prepayment danger is low.

Astoria’s Excessive High quality Technique

Together with our prime funding picks of 2024 is our Excessive High quality US inventory technique. Since 2020, we’ve utilized this technique. The technique quantitatively selects the best high quality shares inside every sector, utilizing sector-specific high quality metrics. It’s equally weighted and sector-optimized to the broad massive/mid-cap US market. This is a crucial level as a result of a broad market equal-weight index just like the S&P 500 equal-weight assigns equal weight to all shares, ending up with ~16% know-how publicity. Astoria’s high quality technique, however, using sector optimization, has ~31% know-how publicity (As of March 11, 2024). 

Why is it equal weight? Over time, SPXEW has outperformed SPX (market-cap-weighted). Since 1999, SPXEW has outperformed SPX by 310% cumulative returns and 1.96% annualized returns. See chart under.

Why high quality? Analysis exhibits that the standard issue has the next return/danger over time than different components.

Astoria is a strategic investor. We use the equal-weight high quality technique as a long-term portfolio allocation. It enhances our progress allocation and diversifies our market-cap-weighted core fairness positions..

Astoria’s View on ETF Traits

Bitcoin is drawing all of the headlines. We’re constructive on the asset class however should anticipate a pullback earlier than it enters our options allocation.

We imagine equal weight is an important diversifier. As talked about, we’re implementing it with market-cap-weighted and quant/smart-beta (1/3 every).

Company spreads are very tight, and front-end charges stay stubbornly excessive; this should change earlier than droves depart cash markets and T-Payments.

Mounted revenue has taken in large inflows YTD. That is unusual since AGG is down 0.51% and SPY is up 7.57%, as of March 11, 2024. 

Broader inflows into equities are reliant on financial information and Fed choices. We’ve obtained numerous inquiries about small caps and worth. We would wish to see fee cuts earlier than allocating to smaller caps in our portfolios.

If financial energy continues, this may invariably hold charges the place they’re; worth, small-caps, and overwriting will wrestle whereas high quality, progress, and market-cap-weight will stay enticing. QUAL noticed important inflows in 2023, returning 30.88% within the calendar yr and +10.80% YTD as of March 11, 2024.

China’s deflation points will trigger DM exporter-driven international locations to endure. We anticipate US inflows to proceed.

The ‘Yr of the EM’ was forecasted, going into 2024, however it’s but to be seen. YTD via March 11, 2024, KWEB -4.81% and EEM +1.74%. Astoria believes EM will proceed to wrestle if the greenback strengthens and charges are held.

As of March 12, 2024, Astoria Portfolio Advisors held positions in QUAL, DGRW, DXJ, SPMB, BTAL, GLDM, QGRO, AGG, and KWEB on behalf of its shoppers. Previous efficiency is just not essentially indicative of future outcomes. All information as of March 11, 2024.

Warranties & Disclaimers

As of the time of this publication, Astoria Portfolio Advisors held positions in SPYG, SPY, SPYV, SPDW, SPMD, SPSM, SPEM, JNK, SPBO, SPAB, MUB, IEF, SPIP, GLD, SLV, USO, BCI, TLT, and LQD on behalf of its shoppers. There aren’t any warranties implied. Previous efficiency is just not indicative of future outcomes. Data introduced herein is for academic functions solely and doesn’t intend to make a proposal or solicitation for the sale or buy of any particular securities, investments, or funding methods. Investments contain danger and, until in any other case said, will not be assured. The returns on this report are based mostly on information from often used indices and ETFs. This data contained herein has been ready by Astoria Portfolio Advisors LLC on the premise of publicly accessible data, internally developed information, and different third-party sources believed to be dependable. Astoria Portfolio Advisors LLC has not sought to independently confirm data obtained from public and third-party sources and makes no representations or warranties as to the accuracy, completeness, or reliability of such data. Astoria Portfolio Advisors LLC is a registered funding adviser situated in New York. Astoria Portfolio Advisors LLC might solely transact enterprise in these states during which it’s registered or qualifies for an exemption or exclusion from registration necessities

John Davi, CEO & Founder at Astoria Portfolio Advisors, might be talking at Wealth Administration EDGE. Be part of John together with 2,000 attendees and senior leaders now.