Wrought Rebalance: Leaning into Strength

At a Glance: Our Latest Portfolio Moves

• The Big Picture: We are "leaning into strength," shifting portfolios to capture growth in a recovering economy.
• What We Changed: We increased exposure to U.S. and Emerging Market stocks while reducing international developed positions.
• Why It Matters: We see a constructive backdrop of cooling inflation and robust earnings, supporting a more confident stance.
• Risk Control: We added "shock absorbers" (Value stocks and smarter bonds) to balance out our growth bets.

At Wrought Financial Planning, we believe successful investing isn't about predicting the future—it's about preparing for it. One of the ways we do this is through a disciplined process called rebalancing.

Most people think rebalancing just means "selling high and buying low" to get back to a target. But for us, it’s also about positioning—making tactical adjustments to align your wealth with the current economic reality.

Recently, we completed a rebalance for our clients. For those getting to know our firm, we wanted to share the "why" behind our moves to give you a window into how we think and manage capital.

Here is a look at the key changes we’ve made and the "why" behind them.

Moving from "Cautious" to "Confident"

In September, our outlook was "selectively bold." Today, the data tells us we can be even more constructive. Inflation is cooling, corporate earnings are strong, and economic growth forecasts are solid.

Because of this, we increased our clients' exposure to stocks by about 3%. This isn't reckless optimism; it's a data-driven decision to ensure our clients participate in the market's upside rather than sitting too heavily in cash or bonds as the economy strengthens.

Why We Prefer the "Jet Engines" of Growth

A major shift in this rebalance was moving money out of international developed markets (like Europe) and into the United States and Emerging Markets.

We use an analogy to explain this:

• The U.S. & Emerging Markets (especially tech hubs like Taiwan and South Korea) are the "twin jet engines" of global growth right now. They are driving innovation, particularly in Artificial Intelligence (AI).
• International Developed Markets, by contrast, currently look more like a "station wagon"—reliable but slow, struggling with lower growth and structural challenges.

While international stocks might look "cheap," we believe "cheap" isn't enough. We want our clients invested in the engines of future growth.

Is AI a Bubble? (And What We Are Doing About It)

If you follow financial news, you’ve likely heard debates about whether Artificial Intelligence is a "bubble." It’s a valid question.

However, our analysis suggests this is different from the "dot-com" bubble of the late 90s. Back then, companies had big promises but no profits. Today’s tech leaders—the companies building the AI infrastructure—are generating massive amounts of free cash flow.

This isn't speculative mania; it's a productivity super-cycle. We are keeping our clients invested in this theme because the data shows it is supported by real earnings, not just hype.

As the chart below shows, unlike the dot-com era, today's tech leaders are funding this growth with massive free cash flow (the grey area).

With data center vacancy rates at record lows and nearly every available GPU being snapped up, the risk likely isn't overcapacity but underinvestment and energy constraints. Yes, some of these firms sport higher valuations, but a decade of 35% compound annual earnings growth has, in our view, earned that premium. 

Safety First: Adding "Shock Absorbers"

While we are optimistic, we are never complacent. Responsible wealth management means preparing for surprises.

To balance out our growth-focused investments, we added exposure to U.S. Value stocks. Think of these as the "shock absorbers" of a portfolio. If the high-flying tech sector hits a bump, these steady, value-oriented companies help stabilize the portfolio.

We also upgraded our bond strategy. We moved into a more flexible, systematic bond position that can adapt quickly to changing interest rates. In plain English? It’s a smarter way to earn interest while protecting your principal.

The Wrought Philosophy

We don't believe in "set it and forget it." The economy evolves, and your portfolio should evolve with it. By tilting toward the superior earnings power of the U.S. and the AI supply chain, while balancing that risk with smart defensive moves, we believe we are positioning our clients for a strong year ahead.

This is the level of thought and care we bring to every client relationship.

If you are looking for a partner who is proactive about your wealth—not just during tax season, but all year round—we’d love to start a conversation.

Schedule Your Free Consultation Today!