A. Gary Shilling, the investment advisor and economist, is sticking to his lower-risk investment ideas for the time being, suggesting that they've worked well even as mega-cap tech stocks fueled the market in recent years.
"For some time, we’ve maintained a cautious investment strategy. That approach is vindicated, at least for now," Shilling said in his latest Insight newsletter, released Thursday.
"The new year saw great investment enthusiasm, even before Trump was inaugurated. His plans to drastically reduce the many government regulations imposed by Biden were warmly received by Wall Street. The details of how he will slash interest rates while slowing government spending and continuing and increasing tax cuts were glossed over," Shilling wrote.
Shilling's ongoing warning to avoid speculative investments, however, has borne out in recent days after a surge in the S&P 500 in 2025's first two weeks, he suggested.
"New technologies have been the focus of investor interest, but as we’ve stated repeatedly over the years, the only thing you know for sure about new tech is that it will soon be superseded by even newer tech. Recent days have provided several shining examples of this reality," he wrote.
"Nvidia, the darling of tech investors last year, got socked by the widespread tech selloff on January 27, dropping 17% in one day to a two-year low, on the heels of the announcement of China’s start-up DeepSeek, which promises major competition for Silicon Valley at a fraction of the cost. Analysts’ forecasts of much-lower outlays for tech gear were also devastating that day," Shilling said.
"Until the dust settles, we’re suggesting our same list of investment strategies," he added.
These are, he writes:
1. Long the U.S. dollar against other major currencies as the world’s premier safe haven and as relatively high interest rates attract foreign money.
2. Long Treasury bonds, which should rise as the Federal Reserve eases credit and the recession unfolds.
3. Avoid overpriced speculative stocks such as the Magnificent Seven, artificial intelligence, SPACs, Nvidia and crypto securities.
4. Switch Asian investments from China to India.
5. Hold extra cash to prepare for later economic and financial market strength until the climates clarify.
Overall, though, Shilling noted, markets started the year well.
"Except for brief freak-outs over a Chinese startup sparking concerns over competitiveness in AI and America’s lead in
that sector and then, a week later, some hawkish sentiments from the Fed, investors mostly breezed through the first
month of the new year, with major indices off to a fairly strong start in 2025," he wrote.
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