Money manager John Davi is positioning his portfolio to account for potential challenges tied to President-elect Donald Trump’s tariff agenda and broader economic policies. Davi, who is the CEO and Chief Investment Officer of Astoria Portfolio Advisors, expressed concerns about the inflationary impact of the new administration’s plans. He sees the possibility that Trump’s policies could lead to higher inflation, so he emphasizes the importance of making careful, strategic investment choices in the current environment.
One area where Davi sees potential upside is in small-cap industrial stocks. He noted that small-cap industrials are likely to perform better than their large-cap counterparts in a pro-growth, pro-domestic policy environment, which Trump’s administration is expected to promote. According to Davi, smaller companies are better positioned to benefit from the regulatory changes and domestic economic policies that the new administration is likely to push forward, especially given the expected focus on American manufacturing and infrastructure.
This view appears to be shared by much of Wall Street, as evidenced by the performance of small-cap stocks since the election. The Russell 2000 index, which tracks the performance of small-cap companies, has risen by about 4% since Election Day, a sign that investors are anticipating a favorable business environment for smaller, domestically-focused companies.
Davi also favors staying focused on U.S.-based investments, despite the risks posed by Trump’s trade policies, including the potential for tariffs and trade tensions. He believes that the U.S. remains the best place for investors in the near-term and sees it as the right “playbook” for the next few years, particularly leading up to the 2022 midterm elections. “We have two years where he [Trump] can control a lot of the narrative,” Davi said, referring to the time before the political dynamics may shift.
However, Davi is more cautious on bonds. The growing U.S. budget deficit, combined with the potential for rising inflation, presents risks to fixed-income investments. He cautioned investors to be wary of bond holdings, particularly in light of recent movements in interest rates. Since the election, the benchmark 10-year Treasury yield has risen by about 3%, a sign that investors are anticipating higher inflation and more government borrowing, both of which can put downward pressure on bond prices.
Given these factors, Davi’s firm, which manages approximately $1.9 billion in assets, is taking a more defensive stance when it comes to fixed income. Instead, he is focusing on equities that are likely to benefit from the economic policies under Trump’s administration, especially those linked to domestic growth.
In summary, Davi is positioning his portfolio with a preference for small-cap stocks over large-cap, overweighting U.S. investments, and avoiding fixed income due to the risks posed by inflation and the growing deficit. As the new administration takes shape, his strategy reflects a belief that certain sectors of the economy, particularly those focused on domestic growth, will benefit the most.