A key rotation away from artificial intelligence stocks may be underway in the market.
According to Astoria Portfolio Advisors' John Davi, a broader range of stocks are getting a "green light" because liquidity is returning to the system.
"The Fed cut rates four times last year. They cut rates twice already. They're going to go again whether its December [or] January," the firm's CEO and chief investment officer told CNBC's "ETF Edge" this week. "Historically whenever the Fed cuts interest rates, usually that's a turn of a new cycle. Market leadership does tend to change quietly."
He lists the latest performance in areas ranging from emerging markets to industrials. The iShares MSCI Emerging Markets ETF , which tracks the group, is up 17% over the past six months as of Wednesday's close. The Industrial Select Sector SPDR Fund is up 9% over the same period.
"I think they can be a good offset to what's an expensive large cap tech position, which dominates most portfolios," he added. "We're living in a structurally higher inflation world. The Fed is cutting rates like, why do you want to take so much risk in just seven stocks?" and
Davi prefers a global balanced approach to investing versus an overweight position in the Magnificent 7 — which is comprised of Apple , Amazon , Meta Platforms , Nvidia , Microsoft , Tesla and Alphabet , which has been trading around all-time highs. The Mag 7 makes up about a third of the S&P 500 .