Michael Arone of State Street Global Advisors - What Are the Odds of Seeing Stagflation in the Economy and How Should Investors Prepare?

Orion's The Weighing Machine

Today Rusty & Robyn are joined by Michael Arone, Chief Investment Strategist and Managing Director at State Street Global Advisors. Michael is the Chief Investment Strategist for the SPDR® Americas Business at State Street Global Advisors. He is responsible for expanding State Street Global Advisors’ footprint and thought leadership effort through frequent contributions to the financial news media, speaking engagements and client interactions. Michael is a highly regarded speaker at industry conferences and is the author of several articles related to investment management practices. He is a member of the firm’s Senior Leadership Team.

During his more than 20-year career as an investment professional, Michael has served as State Street Global Advisors’ Global and EMEA Head of Portfolio Strategy as well as a senior portfolio manager in the Global Active Quantitative Equity Group. He has substantial experience developing long-only and long-short quantitative strategies and managing investment portfolios using quantitative disciplines. Michael has worked extensively with the firm’s global institutional and intermediary clients to help them identify investment solutions that enable them to meet their long-term financial goals.

Key Takeaways

• [03:28] - Michael’s professional background and highlights from his time at State Street.
• [04:40] - What really makes State Street stand out in this industry?
• [06:28] - What is the primary risk that Michael thinks investors are overlooking right now?
• [08:06] - Even though The Fed is still suggesting it will cut rates soon, it hasn’t made any moves yet, so what should the takeaway be from that?
• [09:27] - Why are growing government deficits and rising, bipartisan protectionism often two ingredients in Stagflation?
• [10:52] - How does Michael assess the current inflation trend?
• [13:02] - What are the potential odds that Stagflation actually occurs?
• [14:32] - How can investors better prepare for all possibilities, Stagflation or otherwise?
• [16:10] - What is driving the potential liquidity squeeze?
• [19:58] - Why don’t investors know more about the surprising outperformance of small and mid cap stocks?
• [21:20] - What should investors know about market concentration and “The Magnificent 7?”
• [23:10] - What are some surprises that Michael has noticed in long maturity treasuries?
• [25:30] - What is currently Michael’s favorite investment idea?

Quotes

[14:04] - “Maybe there’s only a 20% chance [of Stagflation], but it’s a chance that investors are not currently pricing in and they’re underestimating. They are pricing it as a 0% chance, and I think it is probably above that.” ~ Michael Arone

[26:56] - “The top 5 companies in the S&P 500, their market capitalization is more than 3.6x all of small cap put together. That surpasses where we were at the height of the Technology, Media and Telecom bubble, so I think you’ll get some mean reversion…I think small cap stocks are…under loved and that’s one of my favorite ideas for 2024.” ~ Michael Arone

Links

• Michael Arone on LinkedIn
• “Lose Yourself” by Eminem
• State Street Global Advisors

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Disclosure(s) - Orion Portfolio Solutions, LLC, an Orion Company, is a registered investment advisor.

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