How to navigate an “unusual” market.

More than a year of expectations of a recession has created a “very unusual market,” said Mason King, principal of Luther King Capital Management in Fort Worth, Texas, which ranked No. 1 on CNBC’s list of the top 100 financial advisors in the United States. For the year 2023.

He noted that the current climate, in general, has created a diverse outlook that we have never seen before, even according to his father — J. Luther King Jr. — who has been in the business for 60 years.

He added that although some experts have recently backed away from those earlier predictions of an impending recession and embraced the idea of ​​a soft landing, “this has been the most unanimous we’ve seen.”

Recent data continues to paint a mixed picture about the direction the economy is headed, with overall growth remaining steady as consumers continue to spend, but the labor market is beginning to ease historically difficult conditions.

Meanwhile, inflation has shown signs of slowing although it remains well above the level at which Fed policymakers are comfortable, raising concerns that the central bank may have more work to do ahead.

“What we would like to see is more confidence in the economic outlook,” he said. “This should give us more peace of mind that we are in a longer-term bull market scenario.”

“The counterweight is that if the late effects of monetary restrictions start to have a greater impact on economic activity, we could see a more challenging market,” he added.

For now, King said he remains cautious about predicting where the economy will eventually settle.

“It takes 12 to 18 months for one price increase to flow through the market, and it has only been 15 months since the first price increase,” he said.

In all, Fed officials raised interest rates 11 times, pushing the key rate to a target range of 5.25% to 5.5%, the highest level in more than 22 years.

“No one knows exactly how much market activity has already been drained, and how much still lies ahead,” King said.

He added that there is still a lot of upside potential for investors, especially in technology and energy stocks.

But instead of relying on the “Big 7” — referring to Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla, which account for a disproportionate amount of year-to-date revenue — small and medium-sized companies with growth capital, he said, They tend to be more cyclical, have attractive valuations, and stay at a discount.

“There are some great names to be found with great opportunities for the future.”

Among his top picks are Trimble, Albemarle, and Permian Resources. “They will continue to move forward and expand, and their valuation continues to trade at a slight discount to their peers.”

To weather the ups and downs, King says the company maintains a longer time horizon, just like the companies it invests in. “We manage downside risk through the resilience of companies and their ability to manage during downturns.”

As a rule of thumb, Luther King Capital Management commits to a holding period of three to five years. “We’re not trying to make a lot of gains in the short term,” King said. “This is our discipline and our philosophy.”

King also attributes the company’s success to practicing what they preach. “We are our biggest customer,” he said. “We invest our balance sheet the same way we invest for our clients.”

Luther King Capital Management has $25 billion under management and more than 3,000 clients.

Listen to CNBC “exchange“ at 1 PM ET today to see Mason King Luther King Capital Managementwhich won first place in CNBC VA 100 list For the first time this year.