MW How Wall Street's most hated stocks have performed against tariffs - and the smart money

By Brett Arends

An update on the hypothetical 'Pariah Capital' portfolio so far this year

Pariah Capital's main achievement in the first half of the year was mostly to sidestep the market turmoil of March and April.

The hypothetical Pariah portfolio, which consists of investments that the rest of Wall Street absolutely hates, has trailed the indexes and the fund managers' favorite investments so far this year when measured in pure return. But it wins easily when measured according to those complex and incomprehensible financial metrics used by financial professionals to measure a portfolio's "volatility" or "risk," as well as the return.

So Pariah Capital boasts a "Sharpe" ratio so far in 2025 of 1.07, a "Sortino" ratio of 2.1 and a "Treynor" ratio of 19.95%. By contrast, a portfolio made up of Wall Street's favorite investments had ratios of 0.8, 1.4 and 11.89%, respectively. (The higher the number, the better.)

Or, to put it in terms that ordinary human beings can understand: From the start of March through the end of April, Pariah Capital's portfolio lost just 2% of its value. The fund managers' favorite investments lost nearly 8%, or almost four times as much.

Naturally, this is all a tongue-in-cheek exercise, including this half-yearly update. Financial professionals may claim that "risk" is "volatility," but most people would define financial risk more simply: The chance of permanently losing money. Various complex measures are probably more useful to Wall Street marketing departments than to actual investors. An experienced Wall Street professional with an advanced mathematics background admitted privately: "Nobody understands the Sortino ratio."

This year's Pariah Capital portfolio consists of seven exchange-traded funds representing the assets that appeared to be most unpopular with institutional investors in the January edition of the BofA Securities fund managers' survey: GNR, AGG, GBIL, VNQ, VDC, VCR and FLGB. They are collectively up 5.7%.

Meanwhile, the six ETFs representing the assets that were most popular with fund managers - VT, VTI, KBWB, VGT, XLV and XLI - have risen 8.8% in total. So score one for the fund managers (so far, anyway).

(Incidentally, so far this year, a plain portfolio of 60% U.S. stocks and 40% bonds is up 5.8%.)

But when you have access to a whole range of marketing shticks and gimmicks, including obscure ratios and the like, you can usually find a way to present a losing six months as a win.

There again, six months is no time at all in which to measure an investment strategy's performance. Among the curious situations on the market right now is that fund managers appear to be suffering from major cognitive dissonance: While predicting 1970s-style stagflation, they are meanwhile neglecting many of the assets that did well during the 1970s, including energy and commodity stocks, real estate, and defensive-style consumer-staples companies - all of which are represented in Pariah Capital's portfolio.

If the fund managers' gloomy warnings about the economy come true, there's decent chance that it will show up in Pariah's full-year performance.

-Brett Arends

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July 16, 2025 15:00 ET (19:00 GMT)

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