July 31, 2025

Written by: Ryan Kelly, CFA®
Chief Investment Officer, Legato Financial Group

The S&P 500 has delivered impressive results in recent years, making it tempting to concentrate solely on that index. However, for most of our clients, we’ve chosen a broader, more diversified path, one we believe offers better risk-adjusted returns over the long term.

For those invested in our LFG Total Market Plus model, we’d like to share an update on our current positioning and outlook as we move through the second half of the year.

Energy: A Structural Bet on Rising Global Demand

We believe the world is entering a new phase of energy consumption driven by AI, data centers, and industrial automation. Our positioning reflects the view that:

• Nuclear and natural gas will be the primary beneficiaries of long-term demand growth.
• Within oil and gas, we favor pipeline and midstream companies over exploration, refining, and production. These firms stand to benefit from stable cash flows tied to volume, regardless of fluctuations in commodity prices.

Bitcoin: A Growing and Legitimate Asset Class

We have a conviction that Bitcoin will appreciate significantly in the coming years. To express this view, LFG Total Market Plus holds:

• A Bitcoin futures ETF
• Select Bitcoin-linked corporations
• A Bitcoin Trust for additional exposure and income

We are targeting approximately 5-6% allocation to this asset class. Bitcoin is volatile, but it’s no longer a fringe idea:

• Market capitalization: Over $2 trillion
• 5-year performance: +947%
• Larger than Exxon, Berkshire Hathaway, and Visa—if Bitcoin were a stock, it would rank among the top 5 in the world

International Investing: Targeted Global Opportunities

While the weaker U.S. dollar has boosted international returns for domestic investors, we aren’t investing broadly in international indices or ETFs. Instead, we are:

• Selecting unique, company-specific global opportunities
• Maintaining a ~20% international allocation

We believe stock-picking outside the U.S. can provide meaningful diversification and exposure to undervalued growth.

Interest Rates: The Fed Is Behind the Curve

We believe the Federal Reserve should already be lowering interest rates. While political pressure on the Fed is increasing:

• Futures markets show less than a 3% probability of a rate cut this week
• Even with cuts, sub-3% mortgage rates are unlikely to return in the near term
• The market is hypersensitive to the tone and messaging from the Fed, but long-term rates may not respond as quickly as hoped

Inflation: Slowing, Not Reversing

Inflation is moderating, but prices remain elevated. It’s important to remember:

• Reduced inflation means slower price increases, not falling prices
• Temporary price spikes (e.g., eggs, cars, semiconductors) have reversed—but broader inflation from 2021–2023 was not transitory
• In our view, the Fed was late to act then, and risks being late again now

We expect inflation to average below 3% over the next few years and do not see tariffs pushing it meaningfully higher.

Source: Bloomberg – CPI YOY

Final Thoughts

LFG Total Market Plus reflects our best thinking about the future of markets, energy, innovation, and risk. While the S&P 500 and US big tech continue to dominate headlines, we are focused on building portfolios that balance opportunity with discipline, and volatility with long-term return potential.

Sources:

CME Fedwatch Tool: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

YCharts – Bitcoin: https://ycharts.com/indicators/bitcoin_market_cap

Top Assets by Market Cap: https://companiesmarketcap.com/assets-by-market-cap/

Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and LFG Wealth Partners, LLC , makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Information contained on third-party websites that LFG Wealth Partners, LLC  may link to are not reviewed in their entirety for accuracy and LFG Wealth Partners, LLC  assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from LFG Wealth Partners, LLC. For more information about LFG Wealth Partners, LLC , including our Form ADV brochures, please visit https://adviserinfo.sec.gov and search for our firm name.

S&P 500 – measures the performance of 500 widely held stocks in US equity market. Standard and Poor’s chooses member companies for the index based on market size, liquidity and industry group representation. Included are the stocks of industrial, financial, utility, and transportation companies. Since mid-1989, this composition has been more flexible and the number of issues in each sector has varied. It is market-capitalization weighted.