Markets and Economy Tech selloff amplifies the case for diversification
Today’s artificial intelligence trade isn’t a bubble yet, in our view, but the best potential opportunities in stocks may be outside of mega-caps.
November 10, 2025
Optimize your portfolios
Portfolio Playbook: Value and size shift
Our framework suggests improving growth. In November, we’re overweighting stocks with a tilt toward value, small-cap, and mid-cap stocks. Optimize your portfolios with our monthly outlook and allocation guidance.
We’re increasing portfolio risk, moderately overweighting stocks.
Our framework has shifted to a recovery regime, signaling a near-term rebound in growth expectations. This reflects an extension of the current cycle — not the start of a new one — supported by resilient labor markets, tight credit spreads, and improving market sentiment. The tech super-cycle, renewed fiscal policy stimulus, and de-escalation of global trade tensions appear to be significant tailwinds, enough to offset weaknesses in the manufacturing, housing, and trade sectors, and overall employment.
The macro environment suggests a positive scenario, where modest growth may be able to persist without reigniting inflation. In response, we’re increasing portfolio risk, moderately overweighting stocks, with a tilt toward value, small-cap, and mid-cap stocks which may benefit from cheaper valuations. In fixed income, we’re moderately increasing credit risk and reducing duration back to neutral, following a decline in yields. We maintain an underweight position in the US dollar.
While the recovery regime may last a few months to a couple of quarters, it’s unlikely to mark a structural shift in US growth. Instead, it reflects a tactical opportunity, in our view, to reposition portfolios for potentially modest gains across stocks.
Business cycle
- Recession doesn’t appear imminent
- Broad-based economic statistics not collapsing
- Credit spreads still contained
Risk profile
- Risk appetite is improving.
- Leading economic indicators signal an improving growth environment.
Policy implications
- Federal Reserve likely to look beyond tariff price shocks
- Policy easing is likely to continue
Business cycle
- “Soft landing” for economy
- Resilient growth
- Contained inflation
Risk profile
- Above-trend global economic rate
- Improved policy backdrop
- Risk-on sentiment
Policy implications
- Contained inflation
- Significant Fed easing
Business cycle
- Deteriorating sentiment
- Rising trade and monetary policy uncertainty
- Reaccelerating inflation
- Prolonged recession
Risk profile
- Deteriorating leading economic indicators
- Flight to quality
Policy implications
- Tightening Fed policy
Asset allocations to consider:
Tilt towards value, small-cap, and mid-cap stocks in November.
A challenge for tactical investors is preparing for the expected and anticipating the unexpected. The tactical asset allocation (TAA) framework from the Invesco Solutions team is designed to enhance a long-term strategic asset allocation (SAA) by making portfolio tilts based on near-term market views.
The tactical, dynamic factor rotation shown below is also utilized in the Invesco Russell 1000® Dynamic Multifactor ETF (OMFL).
Additional resources
Explore further research and analysis from our market and investment experts.
Markets and Economy US-China deal provides clarity, a December Fed cut looks uncertain
A US-China trade truce provides temporary relief for global supply chains, while the Federal Reserve asserts its independence.
November 3, 2025
Markets and Economy New inflation data doesn’t change our expectations for Fed easing
While the one-off inflation report from the Bureau of Labor Statistics showed a 3% rise over the past year, we still expect rate cuts to continue.
October 27, 2025
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