Chris McMahon on Fox Business: Understanding Market Concentration, AI Momentum, and Portfolio Discipline

Chris McMahon on Fox Business – ‘Making Money with Charles Payne’

Chris McMahon, CEO of Aquinas Wealth Advisors, joined Charles Payne on Fox Business’ Making Money with Charles Payne to discuss the current market environment, the role of large technology names in recent market gains, interest rates, oil prices, and the importance of disciplined portfolio allocation.

Key Takeaways

  1. Many households are feeling pressure from higher interest rates and uneven economic conditions.
  2. The conversation addressed how oil prices and inflation may influence the broader rate discussion.
  3. Market leadership remains concentrated in a small number of large-cap names, especially technology and semiconductor-related companies.
  4. Valuation discipline remains important when certain areas of the market move sharply higher.
  5. The discussion reinforced the value of returning to an asset allocation model rather than reacting emotionally to market moves.

Why This Matters for Investors

Market rallies can feel encouraging, but they can also become concentrated in a small number of companies or sectors. For long-term investors, conversations like this help explain why diversification, valuation awareness, and disciplined allocation remain important parts of understanding market behavior.

Frequently Asked Questions

What does market concentration mean in the stock market?

Market concentration refers to periods when a relatively small group of companies accounts for a large percentage of overall market gains. In recent years, large technology and semiconductor companies have played an outsized role in driving index performance. Investors often monitor concentration levels because they can influence diversification, volatility, and overall market leadership trends. Concentrated rallies are not necessarily unusual, but they may increase attention on valuation levels and broader market participation.

Why do investors pay close attention to oil prices and interest rates?

Oil prices can influence inflation expectations because energy costs affect transportation, manufacturing, and consumer expenses throughout the economy. When inflation remains elevated, central banks may be slower to lower interest rates. Interest rates can affect borrowing costs for businesses and consumers, housing activity, corporate earnings expectations, and overall market sentiment. As a result, investors often watch both oil prices and Federal Reserve policy closely when evaluating economic conditions.

Why are semiconductor companies such a major focus in today’s market environment?

Semiconductor companies have become central to conversations around artificial intelligence, data infrastructure, and technology spending. Strong demand for AI-related computing power has increased investor attention on chip manufacturers and related firms. When these stocks experience rapid price appreciation, market participants often begin discussing valuation metrics, earnings expectations, and sustainability of growth trends. This is why semiconductor valuations frequently become part of broader financial market discussions.

What is asset allocation and why is it important?

Asset allocation is the process of dividing investments across categories such as stocks, bonds, cash, and alternative assets based on an investor’s objectives, risk tolerance, and time horizon. The purpose of asset allocation is to help manage risk while maintaining a disciplined long-term investment approach. During periods of strong market performance, investors sometimes revisit their allocation models to ensure portfolios remain aligned with their broader financial goals rather than becoming overly concentrated in a single area of the market.

Why do some investors rebalance their portfolios after strong market rallies?

Portfolio rebalancing is the process of adjusting investments back toward a target allocation after certain positions have grown significantly larger than intended. During concentrated market rallies, some sectors or individual companies may outperform the rest of a portfolio. Rebalancing may help investors maintain diversification and manage overall exposure levels. The process does not guarantee positive outcomes, but it is commonly discussed as part of long-term portfolio discipline and risk management.

Transcript

So let’s bring in Chris McMahon, CEO of Aquinas Wealth Advisors in.

It’s that bifurcated economy. I think the working folks are really suffering in this economy. We’re starting to see, I think, a little bit of that either AI layoff or AI, you know, that’s the cover story to make these layoffs. So people are hurting, interest rates are high.

So it’s really a, we’ve got to hope that worse does some, when he’s able to, make some cuts.

So could this help him make the argument then? You know, I mean, retail sales came in better than anticipated. Of course, adjusted for inflation, retail sales haven’t done anything, but they haven’t done anything for years. Could he actually use that for leverage, do you think? Because he’s got to do some serious arm twisting.

Yeah, I think the president will certainly help him at all costs. He won’t look to oil prices. He’ll say, look away from those oil prices. But I think we need to see at least, I think it’s going to be relatively quick. I think within 30 days of this thing ending, people are saying it might be six months or eight months. I think within 30 days of this thing ending, we’ve got to get oil prices down. And once we have oil prices below maybe 80, I think we absolutely could see hopefully 2 cuts by the end of the year.

A lot of criticism about this rally, right? So you’ve got 10 names, 87% of the move, right? Nvidia, Alphabet, Micron, Broadcom, Apple, Advanced Micro, Amazon, Intel, ExxonMobil, and Cisco. Is that okay with you?

I mean, listen, for me, I think there’s always, I think what people don’t realize, there’s always just a handful of names asked. I don’t think there’s ever been this pronounced, but there’s always typically just a handful of names doing the heavy lifting.

Yeah, maybe the dispersion is even greater this time around. Does it bother me? Yes. Does it keep me up? No, because I think what’s going to happen, I think it likely we’re going to see those numbers on Wednesday. Unfortunately, we’re clinging to those numbers so much, but that Wednesday announcement of Nvidia, I think it’s going to drive these prices and continue to keep this thing rolling, because they keep blowing out of the water.

I think you’ve said it so accurately. We’re not sure even if they blow it out of the water what that does to the stock price. But I think there’s opportunity, particularly, as you know, if you take those 10 stocks out, what happens to the markets up 5%? There’s money to be made in large cap stocks.

So you’re kind of licking your chops to do some rotating here.

Absolutely.

You also on your note that maybe it’s time for some of the PE ratios of these semis are just a little bit high. Now, we always kind of talk about Micron, which is like single digits, but Broadcom 23%, Intel, 71%, Texas Instrument, 34%. You think they can give up some of that and be okay?

I think we can have a 20% adjustment and be fine by the end of the year. I think, what is it, SOX was at 58 times PE ratio. And when it compared to the weighted S&P at 20 times PE ratio, I think there’s some room in there to give that back, let everybody take a breath and maybe, I think, disperse their assets across regular non-top 10 stocks.

One other area then, you know, because people are watching now. They’re saying, okay, if I start taking profits on some of these high flyers, where do I put the money? How do you feel about soft, I mean, small caps, which were crushing it out of the gate. They crushed it in January. Things turned around with the Iran conflict, but they’re acting better now.

We’re not really rotating towards small caps right now. We’re saying that if you take the MAG 7 out of those stocks as top at least seven, six of them, and you say, what’s in the large cap area that’s undervalued? We like, there’s too many things that are underperforming in that sector first before we have to pivot to small cap.

Here’s the bottom line then is you’re saying more or less stick with what works, but you think maybe a pause for the cause kind of thing. Does that mean you take a few chips off the table and buy the next dip?

Absolutely. I think it’s a good time to maybe consider trimming those things. Get back to your ass allocation model. Great time to, never a bad idea to go back to your model, take 5, 6, 100% off the top, put it in cash and see where we are in August. I think it’s a good example.

Well, we’ll have you back before August. Thank you, sir.

Thanks, Charles.

Thank you a lot, Chris.

The views and opinions expressed in this video are those of the speaker as of the date of the original broadcast. These views are subject to change without notice.
Statements contained in this video that are forward-looking in nature are based on assumptions and expectations that may not materialize. Actual results and market conditions may differ materially from those expressed or implied. This video is provided for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Past performance is not indicative of future results.

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