10X Investments has recently revised its global equity allocation strategy, reflecting a cautious approach in light of current market conditions. South African investors have enjoyed an impressive 14.5% annual return from the MSCI ACWI since August 2014; however, concerns about the resilience of the U.S. economy have prompted this strategic shift. The concentration of returns among the so-called 'Magnificent Seven' stocks—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla—has raised alarms. These tech giants averaged a staggering 76% return in 2023, while the broader S&P 500 index managed only an 8% return. In 2024, the trend continues with the 'Magnificent Seven' up 39% compared to a mere 5% increase in the S&P 500 [b5181ea2].
The dominance of these top stocks is significant, as they account for 37% of the S&P 500 market capitalization, and their price-to-earnings (P/E) ratios are currently at 30x—40% above the long-term average. This concentration raises concerns about potential volatility and the sustainability of such high returns [b5181ea2].
In response to these market dynamics, 10X Investments is favoring the 10X S&P Global Dividend Aristocrats ETF as a means to enhance diversification. This ETF includes 350 companies known for their stable dividends, such as Nestlé and Coca-Cola, and allocates 57.6% of its assets to U.S. companies, with only 5.8% in technology stocks. This strategy aims to balance growth with diversification and downside protection, especially as S&P 500 earnings growth stands at 87% while the Dividend Aristocrats Index shows a slightly higher growth rate of 90% [b5181ea2].
The shift in strategy reflects a broader trend among investors who are seeking stability in an uncertain economic environment. By focusing on dividend-paying stocks, 10X Investments aims to provide its clients with a more resilient portfolio that can weather potential market downturns while still capturing growth opportunities [b5181ea2].