Portfolio Perspectives Video Q3 2026

Thank you for joining me for a preview of this quarter’s Portfolio Perspectives. We are going to take a dive into a few of the key trends impacting asset allocators today with a focus on international equities. But first, a little bit about the big picture. The first half of the year was action packed – with ongoing conflict in Iran, a new Fed Chair taking his seat and explosive growth in the chips market.

The US economy continues to charge ahead with a solid labor market and robust business and consumer spending, despite weak sentiment readings. Inflation rather than growth has moved to center stage as a key concern with discussions now around Fed hikes, rather than cuts - in a complete 180 from the start of the year.

The US and international developed equity markets performed quite well through mid-year, but emerging markets equity was the star of first half as semiconductor and memory chips stocks took off. From a style perspective, US large cap value continued to outperform US large cap growth as capex concerns surrounding the Mag 7 weighed on the growth index. Broadly thought, US earnings growth has been nothing short of spectacular with forward estimates near 27% growth.

Fixed income volatility has moderated from the spike in the spring but we have seen government yields pushing higher across the curve as investors adjust to a “higher for longer” environment. Credit spreads, on the other hand, have remained remarkably stable in recent months. 

In this quarter’s edition of Portfolio Perspectives, one topic we dig deeper into is the reordering of emerging markets equity leadership. In years past, China and India were key drivers of the asset class, however, with the massive AI related growth of semiconductor and memory chips stocks, Taiwan and Korea have recently taken over leadership. Just two years ago, technology was 25% of the index, today its 42%. Taiwan and Korea were 32%, today they are nearly 50%. That does create some concentration risk that investors must be aware of but given the dominant position of these chip manufacturers in the global supply chain and the fact that EME is trading at an overall valuation of 12 times earnings, we believe the asset class can play an important role in most portfolios.

Another area we explore is diversifying portfolios with an often-overlooked asset class – international value. We find that the international value approach provides excellent diversification at the sector level to both international core as well as US value and growth equities. Perhaps most surprisingly is a correlation of just .3 to one of the areas that investors are most exposed to: US large cap growth.

So, what are the implications for portfolio construction? We believe this is the opportune time for investors to examine their international equity exposures, both direct and indirect, to determine if they have enough exposure to emerging markets equity and international value. For further insight on these and other topics, please see this quarter’s Portfolio Perspectives.

 

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