For some time now, I have been writing about the fundamental structural shift occurring in global asset allocation, and specifically, the figurative death of the traditional 60/40 portfolio.

For many years, the typical approach to wealth management and balanced portfolios was to allocate 60 per cent to growth equities for potential capital gains and 40 per cent to public bonds to provide stability and income. 

When a recession struck and equity markets ran into headwinds, central banks cut interest rates, driving bond prices higher and shielding portfolio returns by offsetting stock market losses. Continue…

by Roger Montgomery Posted in Aura Group, Economics, Insightful Insights, Investing Education, Market commentary, Market Valuation.

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In this week’s Video Insight, I explain why market volatility is a normal part of investing. While market pullbacks can feel unsettling, history shows they’ve often been temporary and have regularly occurred even in years that finished with strong returns. The key is staying disciplined and keeping your focus on the long term. Continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Insightful Insights, Intrinsic Value, Investing Education, Market commentary, Market Valuation, Video Insights.

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I joined Kylie Morris on ABC Newcastle Mornings to discuss the recent increase in market volatility and the shift underway beneath the surface of equity markets. We explored how years of momentum-driven investing and record inflows into index funds have fuelled the outperformance of a handful of large technology stocks, and why that trend may now be reversing. We also discussed the next phase of the artificial intelligence (AI) investment cycle, where investors are becoming more selective about which businesses are likely to benefit, as well as the sharp correction in South Korea’s technology sector as a reminder of the risks that can emerge when markets become concentrated.

Tune in from 33:30 here: ABC Newcastle Mornings Continue…

by Roger Montgomery Posted in Economics, Insightful Insights, Market commentary, Market Valuation, Radio.

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Every time the stock market stumbles a percentage point or two, headlines invariably scream the same ominous question: Is the big market crash finally here?

It’s easy to sympathise with investor nervousness, despite the S&P500 being less than three per cent from all-time highs. Tensions overseas are triggering spikes in energy prices as strategic reserves are depleted, inflation persists at rates well above central bank preferences, interest rates remain unpredictable, and tech valuations and AI-related spending seem perpetually stretched.

But look beneath the surface of recent market pullbacks, and a different picture emerges.

It helps to understand the mechanics of market volatility, which isn’t about predicting the exact day a dip will happen, but rather recognising the difference between run-of-the-mill turbulence and structural damage. Continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Insightful Insights, Investing Education, Market commentary, Market Valuation.

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On the surface, markets appear remarkably resilient, so if you’ve felt a sense of calm looking at your portfolio performance lately, you aren’t alone.

But look beneath the surface and the structural fragility you’ll see in valuations, government debt, and global trade makes holding a narrow, concentrated equity portfolio (including any portfolio largely invested in index ETFs) one of the more dangerous bets an investor can make right now. Continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Insightful Insights, Intrinsic Value, Investing Education, Market commentary, Market Valuation, Popular, Technology & Telecommunications.

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How to respond

Across my articles and media commentaries, I have emphasised that preparing for an artificial intelligence (AI) re-pricing is not about timing a top or shorting tech, but rather about protecting capital through discipline, factor balance, and liquidity.

There are five primary strategies to insulate an investment portfolio from an AI re-rating:

1. Diversify away from equity index heavyweights

Broad, passive equity indices (such as the S&P 500 or Nasdaq) are historically concentrated. Passive flows into index funds mean a significant portion of an investor’s exposure is tied to six or seven AI-driven mega-caps.

Rebalance away from broad index funds that leave up to 60 per cent of equity risk tied to the AI trade. Investors might also consider locking in recent gains and diversifying equity exposure across unsung, non-AI themes. Continue…

by Roger Montgomery Posted in Aura Group, Economics, Insightful Insights, Investing Education, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications.

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Last week, Google reported its first ever quarter of negative cash flow, surprising analysts who thought Q1 2027 would be when pressure on cash flows could seriously emerge, and causing the share price to plunge more than seven per cent.

With the clear exception of Tesla, most of the Mag 7 once deserved high earnings multiples because they were asset-light businesses with competitive advantages that didn’t require money to be defended. The artificial intelligence (AI) race has quickly eroded those moats and their characterisation as asset-light, because, over the last two years, they have had to spend hundreds of billions building data centres to remain competitive. Continue…

by Roger Montgomery Posted in Economics, Insightful Insights, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications.

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If you’ve been following the technology headlines, you might be confused by two seemingly contradictory statements. The first is that artificial intelligence (AI) is becoming dramatically cheaper to run, and the second is that tech companies are spending more money on AI compute than ever before.

How can we reconcile these statements, and what does the conclusion mean for companies like Pro Medicus (ASX: PME), Xero (ASX: XRO), NEXTDC (ASX: NXT), Megaport (ASX: MP1) and others?

If the unit price of AI is plummeting, shouldn’t the overall costs be going down? And if AI software is taking over the world, shouldn’t every startup building an AI application (App) be printing money?

To help explain the apparent dichotomy, you need to understand a 160-year-old economic concept called Jevons Paradox that’s currently being referenced everywhere and said to be driving the entire AI industry. Continue…

by Roger Montgomery Posted in Companies, Energy / Resources, Insightful Insights, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications.

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