The Meb Faber Show
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Que Nguyen, Research Affiliates – Walking the Tightrope: High Valuations in an Inflationary Landscape | #505
Today’s guest today is Que Nguyen, the CIO of Equity Strategies at Research Affiliates. In today’s episode, she shares why stretched valuations along with a rise in interest rates and inflation may create a tinderbox for investors. But not everything is gloomy – she’s sure to share some areas she sees opportunity in the U.S. market today. We also discuss the ‘Magnificent Seven,’ fundamental indexing, and where she sees the dollar going from here.
Key Points
- Stretched valuations, rising interest rates, and inflation create risks for investors, particularly in market cap-weighted indexes where narrow exposure to top stocks can reduce effective diversification.
- The Fundamental Index, or Rafi, offers an alternative to cap-weighted indexes by focusing on companies' economic size rather than stock price, leading to a disciplined investment approach of rebalancing and mean reversion.
- Quality investing, as defined by capital discipline and low distress, is crucial for value investors to avoid structurally challenged companies and focus on those with consistent business strategies and sustainable practices.
Resources: The Asset Allocation Interactive
Chapters
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Transcript
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