In this episode of Excess Returns, Larry Swedroe returns to discuss the biggest risks and opportunities facing investors today. From tariffs and immigration to AI and private credit, Larry shares evidence-based insights on how to think about markets without relying on forecasts. He explains why diversification is essential, how investors can “sin a little” with duration and valuation, and why only 4% of stocks drive the equity risk premium. The conversation blends timeless investing wisdom with today’s most important macro themes.

Main topics covered:

Why forecasts don’t work and what investors should do instead
The real economic risks of tariffs and immigration restrictions
How AI may (or may not) impact productivity and market winners
How to build anti-fragile portfolios around macro risks
When and how to “sin a little” on bond duration and valuation
Lessons from past tech booms and investor overconfidence
The 4% of stocks that drive all long-term equity returns
The risks of concentration in the S&P 500
Hidden costs of passive investing and large index funds
When index and factor funds get too big to trade efficiently
Value investing, interest rates, and inflation relationships
The evidence on simple value strategies like Piotroski and Magic Formula
How to think about growth exposure using quality and low volatility
The opportunities and dangers of private credit and interval funds
Why illiquidity premiums exist and how to capture them prudently
Behavioral discipline, diversification, and long-term compounding lessons

Timestamps:
00:00 Forecasting failures and market humility
03:30 Why Larry doesn’t make macro predictions
07:00 The real impact of tariffs and immigration on inflation and growth
11:00 AI, productivity, and the question of who the real winners will be
14:40 How to manage duration risk and “sin a little”
18:00 Investor overconfidence and lessons from past tech booms
21:00 Why only 4% of stocks explain all equity returns
24:00 Market concentration and S&P 500 risk
28:30 Why diversification still matters
30:00 The hidden trading costs of index and factor funds
38:00 How big fund size changes execution and exposure
41:00 Is passive investing too big?
42:30 Value vs growth and interest rate relationships
45:00 Evidence on simple value strategies and Buffett’s alpha
51:00 Factor diversification and one-over-N strategy
54:00 Private credit: opportunity and risks
58:00 Illiquidity premiums and fund structure concerns
01:00:00 Behavioral discipline, patience, and staying diversified

The 4% That Drive All Returns | Larry Swedroe on What You're Getting Wrong About the S&P 500

Excess Returns