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Broaden AI exposure to include energy, materials, and infrastructure equities.
The AI trend remains strong. Digital and energy infrastructure are already benefiting from diversified investment and offer attractive AI entry points.
Smaller firms face greater challenges absorbing cost pressures or adjusting supply chains.
Diversification may be beneficial, particularly in European infrastructure and defense.
Rising risks to U.S. growth and policy stability have led global investors to reassess U.S. asset exposure. Traditional relationships among gold, oil, USD, and Treasuries are changing.
Recent data suggests a slowing economy, and policy changes may spark new volatility. Earnings quality is key.
Stay invested, prioritizing earnings quality.
Consider allocating equity-like risk to high-yield credit, where fundamentals remain favorable.
Geographic diversification remains prudent, even if ex-U.S. outperformance slows.
Maintain a preference for large caps; we believe small caps likely lag until growth broadens, which seems unlikely near-term.
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We expect the Fed to hold rates, with only one possible cut this year, as inflation and labor market risks remain.
Despite tight spreads and persistent rate volatility, we believe the current income opportunity is attractive.
U.S. and European credit fundamentals remain strong. Uncertainty around growth and inflation supports a short-duration, buy-and-hold approach.
Staying short in duration may help manage both rate volatility and longer-term credit quality risks.
Given Treasury curve volatility, we prefer a neutral-to-short duration stance. Consider short-dated IG, HY, and munis, balanced with taxable munis for quality infrastructure exposure.
Structured credit and convertibles may offer compelling fundamentals. Within floating-rate loans, we favor the strongest credit quality.
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Geopolitical risk near U.S. assets is increasing. Inflation surprise risk is also elevated. We believe diversification and inflation-aware assets can help mitigate both. Global shifts toward re-globalization, AI, and energy independence may lead to higher capital intensity, infrastructure investment, and stickier inflation. Access to private markets is expanding and democratizing.
A geopolitical hedge may include a mix of oil, gold, and bitcoin sourced from equity allocations.
Inflation-aware exposures such as commodities, materials, and real estate may benefit.
Qualified investors may consider diversifying into private markets, particularly the less correlated lower middle market.