Investors should prepare for a potential 10% market correction in the S&P 500 (SPX), viewing any "summer swoon" as a strategic entry point to target a long-term index level of 8,000. Consider diversifying away from mega-cap tech by allocating to the Humulus Investment Strategies ETF (HIS), which overweights Communication Services, Industrials, and Utilities. Within the retail sector, a tactical "pair trade" is emerging: take profits in Walmart (WMT) and move into Target (TGT) to capitalize on its operational turnaround. Look for contrarian value in high-quality industrials and transports like Deere (DE), FedEx (FDX), and Delta (DAL), which are currently overlooked despite strong operating discipline. Finally, maintain a long-term position in Home Depot (HD), as the stock is expected to rally significantly once interest rates begin to stabilize and roll over.

Humulus Investment Strategies ETF (HIS)

• Brian Belsky, founder and CEO of Humulus Investment Strategies, recently launched the HIS ETF, which focuses on a high-conviction portfolio of 45 stocks.
• The strategy utilizes a "top-down" approach that prioritizes valuation, earnings growth, operating performance, and technical features rather than broad macro indicators like oil or economic data.
• The portfolio aims to hold at least one stock in all 11 (or 12) S&P 500 sectors but is currently overweight in sectors like Communication Services, Industrials, and Utilities.
• The fund maintains a low turnover rate of approximately 22%, emphasizing long-term ownership of "best-in-class" U.S. companies.

Takeaways

• Diversification with Conviction: Investors looking for a strategy that mimics the S&P 500 but seeks outperformance through selective stock picking may find the 45-stock concentrated approach of HIS appealing.
• Underweight Mega-Cap Tech: The fund is currently underweight the "Magnificent Seven," providing a potential hedge or alternative for investors who feel overexposed to the largest tech names.

S&P 500 Index (SPX)

• Belsky maintains a bullish long-term outlook, suggesting the index could reach the 8,000s by year-end or shortly after.
• He describes the current environment as an "earnings-driven market," which typically sees lower upside volatility than "momentum-driven markets" but is more prone to healthy corrections.
• A market correction of roughly 10% is anticipated before the next major leg up, which Belsky views as a "great opportunity" to get involved at lower prices.

Takeaways

• Expect Volatility: Investors should prepare for a potential "summer swoon" or a 10% pullback, particularly if earnings in mega-cap tech begin to decelerate.
• Broadening Out: The "other 493" companies in the S&P 500 are showing strong earnings growth (17.4% in Q1), suggesting that market leadership is shifting away from just the top seven names.

Industrials & Transports (XLI, DE, CAT, FDX, DAL)

• Deere (DE) and Caterpillar (CAT): Despite near-term headwinds in agriculture and high fertilizer prices, these are viewed as great franchises that will eventually benefit from AI-driven operating efficiencies.
• FedEx (FDX): Mentioned as an interesting play due to its plan to split the company, potentially unlocking value in its freight and air divisions.
• Delta (DAL) and United (UAL): Highlighted as exceptionally well-run companies. Belsky breaks the traditional rule of "never owning airlines" because of their improved operational discipline.

Takeaways

• Contrarian Opportunity: The Industrial sector is identified as a place where investors aren't looking enough. Look for companies where Return on Equity (ROE) and Return on Assets (ROA) are beginning to turn.
• Airlines as Quality Plays: Delta is singled out as a best-in-class pick within the transport space.

Consumer Staples & Discretionary (COST, WMT, TGT, HD)

• Costco (COST): Viewed as a top 25 company globally, though currently expensive from a valuation perspective.
• Walmart (WMT) vs. Target (TGT): Belsky suggests a "pair trade" might be emerging—moving out of Walmart (which has had a massive run) and into Target.
• Target (TGT): Liked because it is an "operationally broken" company currently being fixed by new leadership.
• Home Depot (HD): Currently trading poorly ("like dog shit" in Belsky's terms) due to a recent acquisition and high mortgage rates, but remains a "brand name" to hold for the long term.

Takeaways

• Retail Strategy: Focus on companies undergoing operational turnarounds (Target) or those with massive scale (Costco), but be wary of the high valuations in defensive staples.
• Rate Sensitivity: Home Depot and Lowe's are expected to "flock" higher once interest rates eventually begin to roll over.

Technology & AI (NVDA, MU, STX, CRM)

• Semiconductors: Belsky admits to missing the Micron (MU) run but remains cautious, noting that memory chips are historically the most volatile earners in the tech sector.
• Software (SaaS): Mentions a "Saaspocalypse" where companies like ServiceNow and Salesforce have struggled despite good earnings.
• Private AI Companies: The potential IPOs of SpaceX, OpenAI, and Anthropic are viewed with caution. Belsky notes that if these "wildly unprofitable" companies fast-track into indices, it could signal a contrarian negative or a "bubble" peak.

Takeaways

• Valuation Risks: Parabolic moves in names like SanDisk or Seagate make the analyst nervous; he expects the eventual correction to be led by the stocks that went up the most.
• AI IPO Watch: Keep a close eye on Anthropic as a potential "pure play" that may have better enterprise stickiness than OpenAI.

Fixed Income & Macro

• Interest Rates: Belsky believes the 10-year Treasury yield is "normalizing" in a range of 3.5% to 4.5%.
• The Fed: He does not believe the Federal Reserve will cut rates soon, but suggests the 10-year yield could still cool off independently as inflation "escalates down."
• Oil (WTI): Anticipates that once Middle East tensions ease, oil prices will roll over, which would act as a catalyst for lower yields.

Takeaways

• Normalization: Investors should stop waiting for "emergency" low rates and get comfortable with the current 4% range as a sign of a healthy, growing economy.