Stocks & Markets Podcast: Portfolio manager navigates the K-shaped economy | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

This article is based on TheStreet’s Stock & Markets Podcast. Hosted by Chris Versace, the veteran Wall Street investor and lead portfolio manager for TheStreet Pro, the weekly podcasts are available early to members of TheStreetPro investing club.

All right, boys and girls, this economy is being brought to you by the letter K.

Specifically, we’re talking about the K-shaped curve that reveals different parts of the economy recovering at different rates.

The term became widely used to describe the economic recovery following the pandemic, where high-income households with wealth and stable jobs recovered well while many low-income individuals faced job losses and financial insecurity.

“In the K-shaped economy where the top end of the K, the upper income where you have assets, you have homes, you’re doing pretty well,” said Eric Clark, chief investment officer of Accuvest and portfolio manager of Alpha Brands Consumption Leaders ETF (LOGO).“You’re feeling pretty well and you’re spending pretty.”

Clark discussed the economy and the holiday-shopping season with TheStreet Pro’s Chris Versace during the Nov. 19 edition of the Stocks & Markets Podcast.

“The bottom-of-the-K people are a little cautious about their job security with potentially AI and how that’s going to affect jobs and job availability,” he said. “And we’re a little bit nervous about spending and we’re being very choiceful, which is why we’re looking for deals.”

Clark said that 60% of global gross domestic product is household spending, where people spend “on stuff they want and stuff they need.”

Portfolio manager watches consumers wallets

The LOGO ETF website explains its investing targets and strategy thus: “From the sneakers we lace up to the platforms we stream on, trusted brands guide our choices. The LOGO ETF gives you exposure to the world’s most admired logos — powerful brands that dominate global consumption, culture and mindshare.”

“The goal of this strategy with LOGO is what are consumers doing with their wallet?” Clark said. “How were they spending? How are they feeling?

“Which brands do they really feel loyal to — and in many cases fiercely loyal to — but then from a business perspective, what brands are B2B brands that are really helping other businesses generate more sales, better customer loyalty, better operating efficiencies, and things like that.”

More Retail:

Versace asked about Clark’s expectations for the holiday shopping season. U.S. holiday retail sales are projected to exceed $1 trillion for the first time, with the National Retail Federation forecasting between $1.01 trillion and $1.02 trillion in November and December.

“I think it’s going to be a little more challenging than some of these early forecasts have let on,” Versace said. “I know the government shutdown is over. Back pay is coming, but I think the consumer is still very selective, very hesitant.”

“I agree the data, the data shows it,” Clark said. “The soft data has been really dreadful all year long. We might be feeling a little miserable. And we might be feeling a little uncertain about our job security and about the tariffs and all the things that are happening in DC.

“But consumption is part of our DNA,” he added. “But we are being mindful of spending money and saving money where we can. I certainly think the holiday shopping will be about where can we save money, but I still think we’re going to get that first trillion-dollar retail sales.”

Clark said that the folks in the upper part of the K tend to do half or more of the spending “and they’re feeling pretty good.”

Volatility is investors’ friend — usually

“We think if you’re at the upper end of the K, you’re going to continue spending on the things that you normally spend,” he said. “You’re not really worried too much about inflation, even if you don’t love spending more.”

On the investing side the current class seems much more short-term-oriented than in previous years, he said.

“Everybody wants that immediate hit of dopamine,” he said. “And that tends to force them to chase smaller groups of stocks. This year it’s obviously been in low profitability, highly speculative type of names. And that works until it doesn’t.”

Clark said investors should not be afraid to barbell their momentum-stocks basket with quality stocks that are underperforming.

“The next wave of outperformance probably comes from something different than what’s outperformed here, at least historically speaking,” he said. “And you’ve got to have exposure to the largest theme in the world and that’s consumer spending.”

Consumer-discretionary stocks are only 10% of the S&P 500, communication services issues are 10%, while consumer staples are only 5%.

“Those three sectors alone are really where most brands live,” he noted. “And so, you know, if you’re a passive investor, you’re definitely not getting exposure.”

Clark reminded investors that “volatility is usually your friend if you have a longer-term time horizon.”

“And we’re getting some volatility right now for people to take advantage of,” he said.