By Steve Garmhausen

Wall Street's legendary herd mentality is on display as ever, with investors continuing to rally around a handful of megacap technology stocks. But those who wish to wander off the beaten path in search of opportunities will find them in many places. For this week's Barron's Advisor Big Q, we asked investment professionals to share their favorite off-the-radar picks.

Lisa Shalett, chief investment officer and head of the Global Investment Office at Morgan Stanley Wealth Management: One opportunity is emerging markets -- both emerging market equities and emerging market debt. After 10 years in a bear market, Chinese equity markets have been in a bull market for the past 18 months. And you could create a pretty strong narrative that it's the beginning of a multiyear bull market. The Chinese bull market is premised on a lot of the same things the U.S. bull market has been premised on, which includes the generative-AI revolution and the investment that will need to be made to power it. We think China is actually going to survive the trade war quite well, that they are using the vacuum of American leadership to their own advantage and are going to craft a new a new sphere of influence when it comes to global trade, exporting deflation and capacity around the world in constructive ways and reigniting their consumer culture as consumers gain wealth and confidence through the stock market.

Emerging market debt is also a really interesting story. When you speak about interest-rate dynamics around the world, most central banks have the door open because of disinflationary impulses to start cutting rates. One of the most exciting areas is Brazil. Local Brazilian debt is currently paying 15%, and in a world where the U.S. dollar may continue to weaken against currencies like the Brazilian real, you can own that unhedged.

Alex Shahidi, managing partner and co-chief investment officer at Evoke Advisors: Gold is an asset class that many advisors tend to overlook, and there are aspects of it that I think are very surprising. If you were to remove the name and just look at some of the numbers, it would surprise a lot of people and they'd want to invest in it. Gold has done very well recently, but it has actually performed exceptionally well for a long period of time. Since we came off the gold standard in 1971, its return is barely behind that of global stocks.

Since the turn of the millennium, it has outperformed global equities by 4% a year. So long-term returns are attractive, and it's also highly diversifying. Since 1971, gold's best decades have occurred during the worst decades for stocks, and its worst decades have occurred during the best decades for stocks. And if we look ahead, the world in which we live has elevated geopolitical risks. There are concerns for the first time in a long time about the U.S. dollar as a store of wealth, particularly by holders of dollars outside of the U.S., and there is no clear second-place currency. So gold has all of a sudden become much more interesting to those outside the U.S. And so you're seeing rising demand for gold. You can think of gold as another currency, competing with cash. Cash was yielding zero for a long time, and then all of a sudden the yield of cash went up a lot. You would think in that environment gold would go down, but it's actually appreciated. That's another sign of persistent underlying demand.

Brian Huckstep, chief investment officer at Advyzon Investment Management: The first opportunity I think deserves a look is small-cap equities. It's not exactly a hidden gem, but it's one of the larger asset classes that has fallen by the wayside in the wake of the AI juggernaut over the past few years. Small-caps' valuations are attractive, although they don't have the momentum of the large-caps. We increased small-caps in our portfolios in July of 2024, and we were a little bit early, but I like that tilt, and we're considering increasing it.

One that's a little more hidden is levered loans on the fixed-income side. There has been a lot of speculation about inflation, not just from tariffs, but over the medium and longer term because of the increasing national debt and the fact that the federal government has not balanced the annual budget. If inflation does happen, fixed income will be one of the most-impacted asset classes. Real estate is another one. Levered loans tend to have floating-rate coupons, and the issuing corporations take on all the inflation risk. When inflation goes up, the yields tend to go up, and so investors are protected. So that's an asset class I'm attracted to right now as an inflation hedge.

Dave Grecsek, managing director in investment strategy and research at Aspiriant: We still think tech earnings are going to be pretty solid, but we're past the peak growth rate. You couple that with some of the market expectations from a price-to-earnings standpoint and I don't think really tech is the place to be. We actually like pretty much everything else outside of tech, though. In particular we like value-style equities. We think there are some decent opportunities in financials. They are priced attractively, and while there are diverse businesses in this category, I think there are a couple of positives. One, expect the steepening yield curve trend that we've been seeing play to continue, especially as the Fed looks to cut short-term rates. That's a positive for net-interest margins for this sector. And from a policy standpoint, a near-term catalyst is the deregulation that is set to occur for the U.S. financial industry. That could mean looser capital requirements and a more vibrant M&A environment, which we're starting to see.

For some financial services firms that have more investment exposure, like the Schwabs and the wirehouses, this uncertain policy environment has created a lot of trading activity, and that's been another positive. We're still in the middle innings of the tariff game, so there's going to be a fair amount of uncertainty, and to the extent that lends itself to more trading, that's another positive for financials. So at the end of the day, you're not paying a high multiple, and there are some near-term catalysts that could be supportive.

Write to advisor.editors@barrons.com

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September 03, 2025 15:08 ET (19:08 GMT)

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