Portfolio Perspectives // Q1 2026

Economic expectations improved through 2025 as the US economy accelerated through the second half of the year supported by strong consumer spending, growing exports, and easing monetary policy. With the US Federal Reserve in rate-cutting mode despite sticky inflation, 2025 saw an “everything rally” across stocks, bonds, and precious metals. Economies outside the US such as Europe and Japan are also showing signs of improvement. Within equities, we have seen leadership rotate to non-US equities supported by both growing corporate earnings and valuation expansion. Within fixed income, while credit spreads remain tight relative to historical levels, improving credit quality and solid all in yields offer opportunity for selectivity across various fixed income asset classes.

In this quarter’s edition of Portfolio Perspectives, we explore the practical applications for asset allocators in today’s complex market. As global markets navigate the current environment, we delve into the opportunities and challenges that lie ahead:

• The Great Equity Rotation: A shift from US to global ex-US markets is underway, while US value and small-cap stocks close the performance gap with growth and large-cap equities. Is this the start of a longer-term trend?
• Japan Equities: A Rising Force: Japan’s economic reflation and improving corporate governance are positioning its equity markets as a key player on the global stage.
• The Rising Quality of US Corporate Bonds: US corporate bonds have seen a remarkable transformation, with improved credit quality, stronger fundamentals, and attractive yields, with high-yield bonds in particular offering compelling opportunity for investors seeking diversification and solid risk-adjusted returns.
• Trends in Portfolio Design: Explore the evolving strategic asset allocation, the total portfolio approach, and the growing demand for scale customization.