Mid Year Outlook: We Lean Contrarian

Kurv argues that investors should position for stagflation, higher long-term yields and rising volatility rather than follow the market's bullish consensus.

• Headline CPI is running at 4%, the Strait of Hormuz crisis has resumed and crude oil may rise further, while downward payroll revisions point to a weakening labor market.
• AI-related corporate capital expenditure now accounts for most GDP growth, creating concentration risk; the FOMC's removal of forward guidance and the 2026 midterms could further increase volatility.
• Kurv expects short-term rates to remain flat despite market pricing of 1–2 Fed hikes, while heavy government spending and Treasury issuance should push long-term yields higher and steepen the curve.
• The firm favors growth areas linked to AI demand, including KQQQ and KMEM, sees MSFT and NFLX as cheap, and says NVDA has returned to its 2023–2024 P/E ratio.
• Kurv expects the yen to weaken because of Japan's fiscal position, the pound and euro to depreciate against the dollar, and emerging-market currencies to outperform developed-market currencies.
• It sees potential in copper from AI spending and electrification, possible support for gold if real rates fall, and insufficient compensation in still-too-tight investment-grade credit spreads.

Takeaway: Kurv recommends favoring short-maturity and high-income strategies such as LQID and KYLD, selected AI and metals exposure, and avoiding rate-sensitive equities and investment-grade credit, while acknowledging that these are forward-looking views rather than guaranteed outcomes.