AI Lifts All Ships
Romo said that the impact of AI will increasingly reverberate through most sectors and industries, leading to a variety of investment opportunities. First, there’s the manufacture of the semiconductor chips and equipment, with top companies being ASML, Applied Materials, NVIDIA, TSMC and Broadcom. Then there’s cloud computing and AI software, as created by Microsoft, Amazon and Google. And finally there are the major industries that will benefit from AI development: tech and telecom, financial services, healthcare/pharma, legal/professional services, and automotive and assembly. And of course defense and consumer, he said.

Putting aside the “FOMO” of AI investment, Romo said he believes companies are seeking productivity improvements, and they’re going to find that with AI.

“Semiconductors, the internet, the cloud, data—artificial intelligence is now bringing that all together to create something we think is pretty profound,” he said. “This is really happening, and it’s actually delivering productivity across a number of different industries.”

Cyclically, what’s old is new again, he said. Chemicals, banks and other financials, and industrials are areas of interest, especially with companies that cut capital expenditures and dividends in response to higher interest rates.

“There are companies with great businesses that have suffered post-pandemic and now are really well positioned,” he said. “It’s almost around the world, almost in every industry.”

Bonds Over Cash 
Cash currently yields just over 5% for money market investors, and Atluri said that yield is going to fall as the Fed cuts rates through 2024. Investors should see yields drop to 4% by the end of next year.

“And it’s going to be even lower than that at the end of two years,” he said. “So your one-year return on cash is probably 4.75%.”

But investors in a core bond fund, which holds longer-duration securities, will see an upside to the Fed’s rate cuts that cash will miss out on, he said.

“With a bond fund, it goes the other way. For every 50 basis points lower in yield, gives you an additional 3%,” he said. “So you would get 4.7% from the yield plus 3% for just under an 8% return for a core bond fund versus a little over 4.5% for cash.”

The time is now for the $6 trillion that’s sitting in money market funds to take advantage of the better returns that will be available down the road, he said.

“Bonds today clearly have a role in almost every portfolio given these dynamics,” he said. “Upgrade your bond portfolio and build from the core. If you had to own just one bond fund, I would recommend a high-quality, core bond fund designed to pair well with equities.”

Investors with a little more tolerance for risk should primarily still use that core bond fund, but add in a multisector income fund and a core-plus fund to boost yield, he said.

First « 1 2 » Next