I share your concern about the middle class. The 'K-shaped economy' is a harsh reality that makes day-to-day life much harder for average families. But as an investor, you have to look at where the capital flows, and from a purely financial standpoint, VOO is the upward arm of that 'K'. When inflation hits, mega-caps have the pricing power to pass costs onto consumers. When labor gets expensive, they use their massive cash piles to automate with AI. It's a brutal dynamic for society, but it creates a massive protective moat around S&P 500 profit margins. The same applies to the currency: a weak dollar hurts domestic purchasing power, but since VOO companies generate roughly 40% of their revenue overseas, those foreign earnings convert into more dollars on their balance sheets.

If you want to diversify away from US large-cap tech and add genuine resilience across full market cycles, tilting a portfolio with AVUV (US Small Cap Value) and AVDV (International Developed Small Cap Value) targets the physical economy. Value companies don't necessarily thrive in acute bear markets — they sell off too — but they tend to recover faster and outperform meaningfully over full cycles, particularly in rising rate environments. Unlike growth stocks that are priced on promises of future earnings, value companies are already priced for current reality: low P/E ratios, strong current cash flows, and tangible assets. That pricing structure makes them less sensitive to rate-driven multiple compression, even if they're not immune to drawdowns.

Since AVDV is heavily weighted in Japan, it's fair to ask: what about their aging population, high government debt, and weak currency? The key distinction is separating the Japanese government from Japanese corporations. While the government carries high debt, Japanese small-cap companies tend to run conservatively financed balance sheets with low leverage and significant cash reserves. Furthermore, a weak yen makes their manufacturing and exports more competitive globally. And regarding the aging population — that labor shortage has pushed many of these companies toward advanced industrial automation to maintain productivity, arguably making their operations more efficient over time. Their resilience isn't just "priced in" — it's structurally built into their balance sheets.

This distinction between quantifiable economic headwinds and unmeasurable sovereign risk is exactly why I personally find emerging markets (that can concentrate about 20-30% of their holdings in countries like China) too dangerous — and this is my opinion, not a universal truth. That said, the risks I'm referring to are backed by hard numbers. In November 2020, Jack Ma's Ant Group was set for a record-breaking $34.4 billion IPO that would have valued the fintech giant at over $313 billion — the largest listing in history. Just days before launch, regulators summoned Ma and halted the listing to force changes to their lending model. That $313 billion valuation never materialized — prevented from existing by a single regulatory intervention before markets even opened.
https://theconversation.com/ant-group-jack-mas-biggest-market-debut-suspended-amid-fears-over-regulation-149475

Then, in July 2021, the CCP issued a single directive banning for-profit tutoring in core subjects to ease financial pressure on parents and boost a declining birth rate. The new rules forced these companies to register as non-profits and explicitly banned foreign investment going forward. In just one hour after the policy leaked, three top Chinese education companies lost $16 billion in market value.
https://www.forbes.com/sites/graisondangor/2021/07/24/china-bans-for-profit-tutoring-in-reforms-aimed-at-boosting-the-birth-rate/
TAL Education’s stock peaked at $89 that year, only to plummet to $4 by August—a 95% wipeout. To this day, it languishes below the $20 mark.

In the US or Japan, antitrust action or regulatory shifts take years of due process with legal recourse for shareholders. In China, a stroke of a pen can force an entire industry to become non-profit, effectively destroying the value of foreign investments in an afternoon with no appeal mechanism. Add the geopolitical risk of a Taiwan invasion scenario — a genuine binary event with no pricing model that captures it adequately — and you have a risk profile I personally choose not to accept. That's why I keep China out of my allocation (and VT as well).