John Davi, a renowned money manager, is bracing for potential hurdles that could come with President-elect Donald Trump’s proposed tariffs. Davi has expressed concern that the incoming administration’s approach could lead to significant inflation, thus emphasizing the need for careful investment decisions.

According to the CEO of Astoria Portfolio Advisors, investing in small-cap industrials is a more prudent option than large-cap industrials. He voiced this perspective during a recent interview on CNBC’s “ETF Edge”. As the firm’s chief investment officer, Davi is confident that the expected pro-growth, pro-domestic policy changes will favor small-cap businesses.

Wall Street’s recent behavior seems to echo Davi’s sentiment. Following the presidential election, the Russell 2000 index, which monitors small-cap stocks, has seen a roughly 4% increase as of last Friday’s closing.

With $1.9 billion worth of assets under his management, Davi is also advising investors to keep their focus domestic, despite potential tariff-related risks. He firmly believes that being “overweight the U.S.” is a sound strategy for the next few years leading up to the midterms. Davi suggests that the narrative can be controlled considerably during the first two years of Trump’s administration.

However, Davi urges caution when it comes to fixed income, primarily due to the escalating budget deficit. He warns bondholders to tread carefully.

Since the election, the benchmark 10-year Treasury yield has seen a 3% increase as of last Friday’s closing.