In a recent episode of Zephyr's "Adjusted for Risk" podcast, Ryan Nauman, market strategist at Zephyr, engaged in a thought-provoking conversation with Jim Besaw, founding principal and chief investment officer at GenTrust. Their discussion provided valuable insights into the current state of financial markets, the impact of AI, and strategies for navigating the ever-changing landscape.
Looking Ahead to 2026
As they delved into the outlook for 2026, both Ryan and Jim reflected on the rapid advancements and shifts in the financial world. Jim shared his experience of starting his career in 1996 and noted the impressive changes over the decades. He emphasized the significant role AI has played in shaping markets, highlighting it as the number one driving force, especially in U.S. markets. Additionally, the conversation touched on the global movement away from the U.S. dollar and advancements in wealth management tools, underscoring how technology can enhance the value offered to clients today.
The Dollar’s Journey and Market Dynamics
Jim provided a reassuring perspective on the dollar's performance, suggesting that variability across markets is healthier than unidirectional trends. Despite a challenging year for the dollar, its weakening has positively influenced international and emerging market trade. Jim also cautioned that currency cycles tend to be lengthy, extending 15-20 years, meaning the dollar may have more room to move in its current cycle.
AI: The Investment Landscape
Addressing the AI sector, Jim expressed caution against becoming overly concentrated in AI assets, given their lofty valuations. He detailed the changing dynamics of mega-cap tech companies, emphasizing the transition from capital-light models to capital-intensive undertakings. The conversation also touched on alternative solutions, such as Apple's distributed computing approach, which could potentially decrease reliance on large data centers.
Managing Risk and Concentration
Both Ryan and Jim explored the implications of high concentration in AI-focused stocks. They discussed Jim's strategy of using options to manage risk and adopting a diversified approach by incorporating equal-weighted indices and non-U.S. markets. This diversification helps counterbalance the inherent risks of being overly invested in a few dominant AI names.
A Practical Approach for Financial Advisors
Jim offered actionable advice for financial advisors facing the challenge of capital gains taxes when adjusting client portfolios. He outlined options such as using collars, exchange funds, and new variations in index products to mitigate risks while maintaining diversification. GenTrust’s innovative approaches have enabled advisors to better manage client portfolios amidst the rapid emergence of new investment vehicles.
Conclusion: Staying Ahead in Wealth Management
As they wrapped up the conversation, it became clear that diversification and thoughtful risk management are key to navigating today’s complex financial environment.
Final Thoughts
This engaging discussion between Ryan Nauman and Jim Besaw not only shed light on current trends but also emphasized the importance of balancing innovation with prudence. As markets continue to evolve, financial professionals must remain adaptable, informed, and ready to embrace new strategies that align with their clients' best interests.
For further episodes of the "Adjusted for Risk" podcast and more market insights, subscribe to the Zephyr YouTube channel and Spotify, or follow them on LinkedIn. Stay informed and make the most of your financial journey.