Re-risking your portfolio: Investor John Davi's picks for the second half of 2025

Astoria Portfolio Advisors CEO John Davi advises investors to "re-risk" portfolios for the second half of 2025, driven by the S&P 500's significant recovery, a weakening dollar, reduced policy uncertainty, and renewed AI optimism. He advocates diversifying beyond the "Mag 7" and traditional S&P 500 ETFs, instead favoring opportunities in industrials, energy, real estate, and fixed income. Davi specifically recommends equal-weighted ETFs to gain exposure to mid-sized and smaller companies with faster earnings growth, anticipating further market rallies and better value outside concentrated technology. This strategy aims to leverage broader market strength and diversification in a potentially rallying environment.

Analysis

Astoria Portfolio Advisors is advocating for a strategic portfolio shift towards increased risk exposure for the second half of 2025, a view underpinned by a significant market recovery and improving macroeconomic indicators. The S&P 500's rebound from a 15% year-to-date loss in early April to a 6.7% gain signals a V-shaped recovery in investor sentiment, driven by renewed confidence in corporate earnings, a weaker U.S. dollar, reduced policy uncertainty, and sustained optimism around AI. The core thesis is a tactical rotation away from heavily concentrated mega-cap technology stocks towards undervalued opportunities across the broader market. The argument is that excluding the 'Mag 7' reveals a more attractively valued S&P 500, with mid-sized and smaller companies exhibiting faster earnings growth. Specific sectors highlighted for this rotation include industrials, energy, and real estate, which are benefiting from AI-related infrastructure investment. For instance, the BNY Mellon Global Infrastructure Income ETF (BKGI) has surged 30% in 2025, substantially outperforming the S&P 500, and offers a 4.17% distribution yield with a portfolio P/E of 16.2x. The recommendation emphasizes equal-weighted ETFs, such as the Invesco S&P 500 Eql Wght Industrials ETF (RSPN), as a means to achieve better diversification. Furthermore, the strategy extends to fixed income, where value is seen in high-yield and corporate credit, with specific ETFs like the Schwab High Yield Bond ETF (SCYB) and SPDR Portfolio Intermediate Term Corporate Bd ETF (SPIB) identified as attractive.

Key Decisions for Investors

• Consider increasing equity allocation and rotating away from concentrated mega-cap tech positions to capitalize on a potential broadening of the market rally over the next six months.
• Evaluate exposure to industrials, energy, and real estate sectors, potentially through specialized ETFs like BKGI or PPI, to gain from AI-driven infrastructure spending and more attractive relative valuations.
• Assess the use of equal-weighted ETFs, such as RSPN, as an alternative to traditional market-cap-weighted funds to improve diversification and capture stronger earnings growth from mid-sized companies.
• Explore adding exposure to the credit markets, particularly high-yield and intermediate-term corporate bonds via ETFs like SCYB and SPIB, to capture value in an environment where owning credit is seen as advantageous.