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