ETF Executives Forecast Pivotal Market Shift Nearing Green Light

A discernible rotation away from artificial intelligence–focused stocks appears to be emerging as broader segments of the market regain favor, according to ETF executives. John Davi, CEO and chief investment officer of Astoria Portfolio Advisors, told CNBC’s “ETF Edge” that returning liquidity is giving a wider set of equities a “green light,” and he pointed to the historical tendency for market leadership to shift when the Federal Reserve eases policy. “The Fed cut rates four times last year. They cut rates twice already. They’re going to go again whether it’s December [or] January,” Davi said, adding that such rate cycles typically mark the start of new leadership trends.

Davi highlighted recent performance across a range of sectors, noting that the iShares MSCI Emerging Markets ETF was up 17% over the past six months through Wednesday’s close, while the Industrial Select Sector SPDR Fund gained 9% over the same period. He argued these areas can serve as sensible offsets to concentrated, expensive large-cap technology positions, and cautioned against excessive exposure to a handful of megacap names. “We’re living in a structurally higher inflation world. The Fed is cutting rates like, why do you want to take so much risk in just seven stocks?” he said, referring to the Magnificent Seven — Apple, Amazon, Meta Platforms, Nvidia, Microsoft, Tesla and Alphabet — which together account for roughly a third of the S&P 500.

Sophia Massie, chief executive of ETF issuer LionShares, echoed a cautious view on an all-in approach to the AI trade. Massie said analysts have estimates for AI’s potential economic contribution, but the competitive dynamics remain unclear. “I don’t think we really understand how that’s going to play out between different companies yet,” she said, adding that current market pricing may be assuming a single firm will dominate AI and reap disproportionate rewards.