U.S. Small- & Mid-Cap Industrial Stocks Are Outperforming and Unappreciated

In this episode of WealthTrack, host Consuelo Mack interviews Richard Bernstein, a veteran investment strategist and chief investment officer at Richard Bernstein Advisors, about the shifting landscape of global markets. Bernstein argues that the defining trend of our era is deglobalization—evidenced by rising tariffs, geopolitical tensions, and supply chain disruptions—which has profound investment implications. He explains that the U.S. industrial base has been underinvested for decades, making modernization and reindustrialization not just necessary but a powerful secular investment theme. Over the past decade, small and mid-cap industrial stocks have outperformed the S&P 500, yet remain overlooked. Bernstein emphasizes that higher inflation—driven by reduced global competition—is a structural shift, not a temporary blip, and that investors should favor pro-inflation assets like industrials, materials, and dividend payers. He also shares his firm’s strategic moves: raising modest cash positions to manage volatility and avoiding corporate bonds due to historically narrow credit spreads that fail to compensate for risk. The episode concludes with a strong recommendation for investors to consider the First Trust RBA American Industrial Renaissance ETF (AIRR), which tracks Bernstein’s own index and has delivered exceptional long-term returns. The episode underscores a pivotal shift in market psychology: from momentum-driven growth investing to a return to fundamentals, with broadening opportunity sets across small caps, international equities, and value stocks. Bernstein’s core message is clear—boring, overlooked sectors like domestic industrials are now the most compelling long-term plays. Investors are encouraged to focus on compounding dividends, avoid overconcentration in the 'Magnificent Seven,' and embrace the underappreciated potential of U.S. reindustrialization. Despite market turbulence, Bernstein maintains that the underlying fundamentals of the U.S. economy remain strong, making this an ideal time to rebalance toward resilient, fundamentally sound, and historically underfollowed assets.