With the election of Donald Trump to a second term, the markets will jump into the way-back machine and look to the late 2010s for guidance. So says Larry Glazer, managing partner of Mayflower Advisors.
A lot of Trump's stated policy plans for the next four years — deregulation, lower taxes and tariffs — will be very similar to those of his first term. But several key factors have changed this time.
Specifically, inflation is running higher than before and that could create new consequences for both the economy and the financial markets.
That's why it's important to tap the expertise of someone who's spent decades in the industry and has seen it all. Glazer and his father partnered to launch Mayflower Advisors, a Boston-based independent advisor, which has served clients for more than 50 years.
His firm focuses on customized wealth management and retirement plan consulting. And he aims to use his firm's experience to serve investors well heading into an uncertain environment.
Expecting A Shift In Leadership With Best ETFs
Glazer's ETF picks show that he's not leaning into popular market themes, such as Big Tech and the Magnificent Seven stocks. He's favoring ideas that diversify beyond these sectors, arguing that strategies, such as dividend yield and value, still have a place in long-term portfolios.
If inflation begins to accelerate in 2025 or the Fed is unable to cut rates the way the markets think they will, sectors with premium valuations, such as tech, may no longer find themselves in favor, he says. That might open the door for previous unloved areas of the market to have their moment to shine.
These ideas are evident in the ETF picks that Glazer believes present opportunities at the moment.
Best ETFs: Bet Against Bitcoin?
Glazer acknowledges cryptocurrency has been one of the market's big winners over the past several weeks. "There is an old expression that trees don't grow to the sky. Well, you wouldn't know it if you watched Bitcoin since the Presidential election," he said.
Bitcoin has certainly gotten a lot of press since the election, currently testing $100,000 for the first time ever. Glazer, however, urges caution. He says, "After a tremendous postelection rally, the crypto trade may be running out of steam into year-end." That's why he suggests considering the ProShares Short Bitcoin ETF, which benefits from a decline in the price of bitcoin.
In particular, he points to the possibility of crypto deregulation as the primary catalyst for the postelection rally. But now the bitcoin rally may be getting overdone. "Even though Team Trump has turned into Team Bitcoin, insiders in the crypto world appear to be sellers. For some investors, BITI may offer a way to hedge their crypto-related holdings."
Diversifying Beyond The Magnificent Seven
Glazer believes that while megacap tech stocks have helped juice portfolio returns over the past couple years, they may be less ideal as an investment moving forward. The new Trump administration might bring back leadership from previously unloved areas of the market and more diversification could be a wise choice. For this, he likes the iShares MSCI USA Equal Weighted ETF.
He notes, "The average stock now may be better positioned for the new postelection reality than the stock market averages. Market-cap weighted ETFs like the S&P 500 have become closet mega-cap tech plays with the Magnificent Seven names, but fail to capture the midcap stocks that may benefit most from proposed onshoring trade policies due to tariffs."
Midsize companies tend to be more domestically oriented and could be less impacted by a prolonged trade war.
The five largest positions in SPDR Portfolio S&P 500 ETF account for more than 25% of the portfolio.
He also likes the fact that some of the companies that could get hit harder in a protracted trade war are underrepresented in an equal-weight ETF. "Financials in this ETF should benefit from deregulation policies. There is a market rotation underway away from Big Tech and this ETF should benefit," he said.
Best ETFs For Value And Yield Overseas
After years of underperformance relative to the S&P 500, international stocks may not be a trending choice. But Glazer thinks they still have potential. "Where to find yield, low valuations and low volatility after two years of big stock market gains in the U.S.? Look overseas," he said. His choice of the iShares MSCI EAFE Value ETF provides exposure to international value stocks which trade at a historic discount to domestic companies.
He explains that "the 4%+ dividend yield provides an attractive income alternative to cash as the Federal Reserve cuts short-term interest rates." The more durable stature of these companies in a potentially challenging environment ahead also has some advantages.
"The holdings in this ETF are high quality multinationals and more defensive in nature, such as Novartis, HSBC, Allianz and Unilever. These stocks should experience less volatility during a stock market correction.
Unlike U.S. stocks, European multinationals have a long-standing culture of favoring dividends over stock buybacks, which means more income for the investor and historically lower P/E ratios."
