This week, the Money Wise guys discuss a strong market rebound, with the Dow rising 1,150 points (+3.7%), the S&P 500 gaining 170 points (+2.9%), and the NASDAQ climbing 469 points (+2.4%). With all three major indices turning positive for the year, the team attributes the rally to lower Treasury yields and favorable CPI and PPI reports. Early earnings reports, particularly from banks, were solid, but the real test lies ahead as the rest of the S&P 500, including major tech companies, releases results later in the month.
A key theme of the episode is the shift away from mega-cap tech dominance, as the equally weighted S&P 500 has begun outperforming its market-cap-weighted counterpart. The guys discuss their recent portfolio rebalance, reducing exposure to overvalued tech stocks and adding an equally weighted ETF (RSP) to increase diversification and reduce risk. They also revisit the market "perversion," where good economic news can lead to negative market reactions due to shifting Fed expectations. This unpredictability reinforces the importance of active management in navigating 2025’s evolving market landscape.
A Portfolio Rebalance
Portfolio rebalancing is a crucial strategy for managing risk and optimizing returns, especially in changing market conditions. The Money Wise guys recent rebalance at the start of 2025 involved reducing exposure to high-performing mega-cap tech stocks, which had dominated the market in 2023 and 2024, and reallocating funds into an equally weighted ETF (RSP) along with other diversified holdings across sectors like healthcare, industrials, and financials. This approach helps prevent overconcentration in a handful of stocks, reducing volatility and ensuring portfolios remain aligned with long-term investment goals. By regularly rebalancing, investors can lock in gains from overperforming assets, take advantage of undervalued opportunities, and maintain a well-diversified portfolio that can better withstand market shifts and economic uncertainties.
In the second hour, the Money Wise guys explore RIA vs. Broker. You don’t want to miss the details! Tune in for the full discussion on your favorite podcast provider or at davidsoncap.com, where you can also learn more about the Money Wise guys or take advantage of a portfolio review and analysis with Davidson Capital Management.
