Excess Returns Recession Indicators Are Breaking. Inflation Isn’t | Megan Horneman on What Comes Next
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Jun 19, 2025 Megan Horneman, Chief Investment Officer at Verdence Capital Advisors, dives into her 'Year of Fragile Optimism' thesis, highlighting the risks of hidden inflation and consumer debt. She discusses why the strength in consumer spending might be misleading and critiques traditional recession indicators that are breaking down. Megan emphasizes the potential of small/mid-caps and international stocks, the importance of active management, and offers insights into the risks and opportunities in the current fixed income landscape. Her macro perspective is invaluable for navigating today’s markets.
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Long-Term Diversification Strategy
- Focus on long-term investment goals and maintain a well-diversified portfolio across asset classes.
- Take advantage of volatility by investing in areas with depressed valuations like small and mid-caps.
Tech Valuations Remain High
- Technology stocks remain expensive despite being important for the future and AI growth.
- Valuations must come down before adding significantly to tech positions.
Beware Concentration Risk
- Concentration risk is significant with few stocks dominating indices like the S&P 500.
- Diversification is essential to mitigate correlated downturns in concentrated portfolios.