Where a 'CIO of the Year' Winner Sees Buying Opportunities

Sterner, winner of a ThinkAdvisor 2025 Luminaries award for CIO of the Year for RIAs with more than $10 billion in AUM/AUA, is upbeat overall but worries that the longer the Iran war drags on, the greater the chance of a recession emerging.

"It's produced a big cloud of uncertainty," he notes.

Apollon, which specializes in affluent and ultra-high-net-worth clients, has assets of $13 billion under management or administration. Earlier this month, it acquired Motley Fool Wealth Management, an RIA that will enable the firm to broaden its financial planning capabilities.

In the interview, Sterner — who previously was with PGIM, Prudential Financial, State Street and MetLife — downplays woes in private credit, while talking up investing in health care. He also addresses interest rates. "I think the Fed is going to stay on the sidelines for now," Sterner maintains.

Here are excerpts from our conversation:

THINKADVISOR: What's your outlook for the stock market and economy in the short term?

ERIC STERNER: The Iran war is my top concern. It's produced a big cloud of uncertainty. The longer it continues, the greater the odds that it could knock this bull market off its tracks.

If we see an extended period with high oil prices [along with] diesel fuel and fertilizer prices going higher, which affects farmers ... it could increase the odds of recession.

But with a big assumption that the war will resolve itself within a few weeks, I remain bullish because we've seen five straight quarters of double-digit earnings growth; net profit margins are at their highest level since 2009; and a lot of benefits are coming through the One Big Beautiful Bill Act, which will help businesses.

Also, I think the Iran war will end soon because we have midterm elections late this year, and the war is not very popular. That's something the White House is mindful of.

THINKADVISOR: Are you concerned about private credit's volatility?

STERNER: We're a big believer in private investments for the right clients.

Certainly, private equity has been in the headlines for a number of months now. I'm not [too] concerned because I think these headlines are overblown. There's no evidence of widespread risk.

There will always be some companies that have struggles, but the private credit space remains healthy. Clients do need to understand the liquidity constraints with these investments. I think there was a big misunderstanding about that among many clients, which is producing those headlines.

There are plenty of firms that are trying to take advantage of the popularity of private credit that don't really have the track record.

THINKADVISOR: Where have you scoped out investing opportunities overall?

STERNER: We started to see some rotation in the markets the first two months of this year. For instance, one of the sectors I really like is health care. It hasn't been a top performer. It's trailed the S&P 500 in [8 out of] the last 10 years.

But it beat the S&P in 2018 and 2022, which were midterm years, just like this year. That speaks to its defensive characteristics when there's volatility.

THINKADVISOR: What about opportunities in technology?

STERNER: Tech has led the way for three years. The AI movement is still in the early innings. It's important to have some of those Magnificent Seven names in portfolios.

THINKADVISOR: What else do you like?

STERNER: If we can get a resolution to this war and if interest rates come down, we expect to see more M&A activity this year. I think that will help financial stocks.

Also, over the years, as more countries have been slowly backpedaling from globalization, it's lowering the correlation between international developed markets and U.S. equities, and [thus] helping to improve portfolio diversification.

We're slowly increasing our allocations on the international front. There are a lot of tailwinds to the rate cuts in Europe as well as fiscal spending. And all the reforms in Japan are really bearing fruit right now for that country.

It's important for us to look for investment opportunities across the world as opposed to just being 100% allocated to the U.S.

THINKADVISOR: What do you anticipate happening regarding interest rates?

STERNER: We're starting to see interest rates rise because there are expectations that the longer this war goes on, the more upward inflation pressure there will be on food, fertilizer, oil prices [and so on].

So I expect interest rates to remain elevated and potentially produce a headwind to equities. Rates will settle down if we can have some type of resolution to the war within the next few weeks. Until then, I don't expect interest rates to fall.

The Fed is caught in a tricky position because inflation was coming down slowly, but at the same time the labor market is hanging in there. Still, many companies aren't hiring.

So I think the Fed is going to stay on the sidelines for now [until] we have resolution in the Mideast.

I expect the 10-year Treasury to remain elevated till we do.

THINKADVISOR: What's one way you're helping clients deal with the market uncertainty brought about by the war?

STERNER: We put out regular market commentary on how we view the markets, where we view risks and opportunities. We've been really leaning into the quality factor, focusing more on companies with a long track record of earnings, and strong cash flows and balance sheets.

In the fourth quarter of last year, when the market was getting a bit more frothy, that caused us to trail some of the major benchmarks a bit, but it's really helped us now with high volatility.

THINKADVISOR: Is your firm giving more emphasis to tax strategies?

STERNER: Absolutely. My team helps our advisors when they're talking to prospects about putting together portfolios in comparison to their existing portfolio. Many times, we're winning those [clients] because they say, "My financial advisor isn't talking to me about taxes, and you guys are. That's why I want to work with you."

The tax considerations that we focus on are a big part of putting together portfolios.

We take taxes very seriously, especially for clients that want exposure to large-cap U.S. stocks. We're a heavy user of direct indexing because year after year, that asset class has proven to be where active managers have the lowest chances of beating the benchmark S&P 500.

So we think it's better to be a bit more passive and look for a tax-efficient solution there. We do in-house indexing, where we can direct-index to a benchmark or ETFs that help clients be tax efficient.