The Seven Rules of Wall Street | Sam Stovall

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Aug 5, 2025

Sam Stovall, the Chief Investment Strategist at CFRA and author of The Seven Rules of Wall Street, delves into crucial investing principles grounded in historical data. He highlights the predictive power of January market trends and discusses the merits of momentum investing versus mean reversion. The conversation covers effective sector strategies, the viability of traditional portfolios in today’s climate, and the emotional challenges of investing. Stovall emphasizes the importance of disciplined investment approaches and offers insights into client behavior amidst market volatility.

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INSIGHT

AI Drives Market Momentum

AI hype is contributing significantly to today's market strength and investor optimism.
Earnings growth in tech driven by AI far outpaces the broader market, keeping investor interest high despite risks.

ADVICE

Rotate Rather Than Exit

'Sell in May and go away' is outdated; instead, rotate holdings to defensive sectors like consumer staples, healthcare, and utilities in summer.
Seasonal sector rotation helps manage risk without exiting the market entirely.

ADVICE

Stick to Quality Value Stocks

Value investing will rebound as tech valuations normalize; meanwhile, stick to high-quality, dividend-paying companies.
Focus on firms with strong earnings and moderate payout ratios to achieve returns with less risk.

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📈 In this episode of Excess Returns, we’re joined by Sam Stovall, Chief Investment Strategist at CFRA and author of The Seven Rules of Wall Street. We explore Sam’s timeless, data-driven investing rules and connect them to today’s market environment—including sector trends, interest rates, Fed policy, investor behavior, and why market history is one of the most underrated tools for navigating uncertainty. This conversation blends historical perspective with practical insights, making it essential viewing for long-term investors and students of market behavior alike.

🔍 Topics Covered:

The power of rules-based investing and emotional discipline
Why momentum often beats mean reversion in sectors
The predictive value of January market performance
How AI hype is shaping today’s market narrative
Whether “Sell in May” still works—and what to do instead
The case for value investing and high-quality dividend stocks
A simple two-sector portfolio that beat tech (with less risk)
Whether the 60/40 portfolio is still viable
The failure of equal weight and small caps to outperform recently
How to manage fear and stay invested during volatile markets
What history teaches about Fed rate cuts and market returns
A momentum strategy for finding “bull markets somewhere”
Sam’s top lesson for the average investor

⏱️ Timestamps:
00:00 – Market performance after strong Januaries
02:00 – Let your winners ride, cut losers short
04:45 – Current sector winners and market concentration
06:30 – As goes January, so goes the year
09:00 – Why Year 3 of bull markets tends to be weak
11:00 – How AI fits into today’s bull case
12:30 – Sell in May—but rotate instead of retreat
14:30 – Why value investing has struggled
16:00 – Tech as the new consumer staple?
17:45 – A free lunch: Tech + staples portfolio
20:30 – The 60/40 portfolio and inflation hedging
22:20 – Don’t get mad, get even (equal weight vs. cap weight)
24:00 – Managing emotions and using history as Valium
26:20 – Don’t fight the Fed: Rate cuts and market returns
28:30 – CFRA’s Fed outlook for the second half
29:40 – There’s always a bull market somewhere
31:20 – Sam’s #1 lesson for the average investor