Schwab Network: Rebalancing Risk with Stability: NVDA v. Growth v. Europe

March 14, 2025

“Markets are signaling a slowdown, and investors should be prepared for volatility,” says Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Wealth Management, during his appearance on Schwab Network. While Friday’s rally may suggest a shift in momentum, Landsberg remains cautious about whether risk-on sentiment will hold. He highlights slowing GDP growth, shifting inflation expectations, and defensive positioning as key factors influencing investment decisions in the current market.

Key Takeaways:

1. Economic slowdown signals caution: Despite recent market rallies, Landsberg notes that bond and currency markets indicate slowing GDP growth and economic deceleration. While inflation data has been cooling, the risk of a rebound later in the year remains.
2. Potential Federal Reserve rate cuts: Landsberg expects the Fed to hold steady in the near term but sees a possible rate cut in June. However, he warns that the Fed could be “whipsawed” if inflation picks up again in the second half of the year.
3. Rebalancing is necessary: He advises investors to trim exposure to over-concentrated areas, particularly technology stocks, which have had an extended rally over the last two years. He believes there may be forced selling in major indices as rebalancing occurs.
4. Defensive positioning in portfolios: Landsberg suggests increasing exposure to insurance companies, utilities, and select international markets, particularly Europe, which has shown resilience as it emerges from a recession.
5. Avoiding small-cap stocks: Despite talk of attractive valuations, he warns that small caps remain a “value trap” given their prolonged underperformance since late 2021. He prefers waiting for stronger earnings growth before considering new positions in the sector.
6. Inflation’s role in market movement: Recent CPI and PPI data show inflation cooling, but Landsberg emphasizes that declining inflation could also signal broader economic weakness rather than an all-clear for markets.
7. Sector rotation opportunities: He highlights insurance and select real estate investment trusts (REITs) as areas that could benefit from the current economic environment, while remaining cautious on overleveraged technology stocks.
8. Potential risks in late 2024: While investors focus on near-term market moves, Landsberg believes inflation could re-accelerate in the back half of the year, possibly forcing the Fed into a more reactive stance.

Landsberg remains focused on market fundamentals, emphasizing patience and diversification. While some investors may see recent rallies as a turning point, he believes the current environment favors a more defensive approach until clearer signs of sustained growth emerge.