CNBC's No. 1 financial advisor shares the secret for navigating a 'highly unusual' market


Mason King

Courtesy: Mason King

More than a year of recessionary forecasts have created “a highly unusual market,” said Mason King, a principal of Luther King Capital Management in Fort Worth, Texas, which ranked No. 1 on CNBC’s list of the top 100 financial advisors in the U.S. for 2023.

As a whole, the current climate has created as diverse an outlook as we’ve ever seen, he noted, even according to his father — J. Luther King Jr. — who has been in the business for 60 years.

Although some experts have more recently backed off those earlier predictions of an impending recession and embraced the idea of a soft landing, “that’s been the most consensus we’ve seen,” he added.

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Recent data is still painting a mixed picture of where the economy is headed, with overall growth holding steady as consumers continue to spend but the labor market beginning to loosen from historically tight conditions.

At the same time, inflation has shown signs of cooling even though it remains well above the level where Federal Reserve policymakers feel comfortable, which has reignited fears that the central bank may have more work ahead.

“What we would like to see is more confidence in the economic outlook,” he said. This would give us greater peace of mind and a better understanding of the longer-term economic outlook. “

“The counterweight is if the lag effects of monetary restriction start to take a larger bite out of economic activity, you could see a more challenging market,” he added.

For now, King said he remains cautious about predicting where the economy will ultimately settle.

“It takes 12-18 months for a single rate increase to flow through the marketplace, and we are only 15 months into the first rate increase,” he said.

Altogether, Fed officials have raised rates 11 times, pushing the key interest rate to a target range of 5.25% to 5.5%, the highest level in more than 22 years.

“Exactly how much market activity has already been drained and how much is still ahead of us, nobody knows,” King said.

Still, there is plenty of upside potential for investors, particularly in technology and energy stocks, he added.

But rather than pile on to the “Magnificent Seven” — referring to Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla, which accounted for a disproportionate amount of the returns year to date — small- and mid-cap growth companies, which tend to be more cyclical, have attractive valuations and remain at a discount, he said.

“There are some great names to be found with great opportunities ahead. “

King’s top stock picks

Among his top picks are Trimble, Albemarle and Permian Resources. “They will continue to grow and move forward, and their valuation still trades at a slight discount compared to their peers. King says that to navigate ups and downsides, his firm has a longer-term horizon. We manage downside risks by assessing the ability of companies to survive and recover from downturns. As a rule, Luther King Capital Management holds its investments for a period of three to five years. King stated that they were not looking for quick gains. This is our philosophy and discipline. King also attributes the success of his firm to its ability to practice what it preaches. He said, “We are the largest client.” “We invest our own balance sheet in the same way that we do for our clients. “

Luther King Capital Management has $25 billion under management and more than 3,000 clients.

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