1.
Deploy cash into bonds: corporate and municipal credit quality is good, and cash rates are biased lower.
2.
Treasure curve volatility leads to a neutral-to-short duration preference, using short duration credit (IG, HY, munis) and balanced with structured products and taxable munis.
3.
Strong fundamentals create an attractive opportunity in structured credit and convertible bonds.
Policity rates have fallen: reinvestment risk still dominates portfolios.
Uncertainty about growth and inflation suggests higher and more volatile market interest rates, making duration an unreliable source of returns.
U.S. public credit quality is expected to remain very strong, supported by still-resilient economic activity.
1.
Deploy cash into bonds: corporate and municipal credit quality is good, and cash rates are biased lower.
2.
While the Q1 pace of European performance is likely not sustainable, we see tactical upside in ex-U.S. equities.
3.
Small caps are unlikely to outperform durably unless interest rates move lower while growth is resilient – unlikely this year.
We are at maximum policy uncertainty, but if earnings quality holds, equity market volatility can provide relief from high valuations and create buying opportunities.
Enthusiasm for U.S. assets is fading, while Europe’s increased defense and infrastructure spending faster interest rates cut offer potential upside.
The AI trend is here to stay, seen in investment in digital and energy infrastructure.
Consider deploying gains into high-yield corporate credit.
While the Q1 pace of European performance is likely not sustainable, we see tactical upside in ex-U.S. equities.
Small caps are unlikely to outperform durably unless interest rates move lower while growth is resilient – unlikely this year.
Diversify equity exposure into AI-related sectors like energy and digital infrastructure.
We are at maximum policy uncertainty, but if earnings quality holds, equity market volatility can provide relief from high valuations and create buying opportunities.
Enthusiasm for U.S. assets is fading, while Europe’s increased defense and infrastructure spending faster interest rates cut offer potential upside.
The AI trend is here to stay, seen in investment in digital and energy infrastructure.
Our
View
How to invest
Consider deploying gains into high-yield corporate credit.
How to invest:
Our View:
Recent macro data suggests a “Goldilocks” backdrop (moderate inflation, balanced employment), but risks like tariffs and valuation volatility remain. Global investors are rethinking U.S. assets amid rising geopolitical risks; traditional relationships between asset classes are shifting.
Small companies are less resilient to input price rises and supply chain issues. Digital and energy infrastructure, including AI, continue to attract diversified investment interest.
Stay invested, with an emphasis on earnings quality.
Consider equity-like risk in high yield corporate credit where fundamentals and yields are attractive.
Pursue prudent global and geographic diversification; expect investors to rebalance U.S./non-U.S. exposures.
Favor large caps over small caps due to better historical resilience.
Diversify equity exposure into broader AI themes: energy, materials, digital infrastructure.
Recent macro data suggests a “Goldilocks” backdrop (moderate inflation, balanced employment), but risks like tariffs and valuation volatility remain.
Global investors are rethinking U.S. assets amid rising geopolitical risks; traditional relationships between asset classes are shifting.
Small companies are less resilient to input price rises and supply chain issues.
Digital and energy infrastructure, including AI, continue to attract diversified investment interest.
Stay invested, with an emphasis on earnings quality.
Consider equity-like risk in high yield corporate credit where fundamentals and yields are attractive.
Pursue prudent global and geographic diversification; expect investors to rebalance U.S./non-U.S. exposures.
Favor large caps over small caps due to better historical resilience.
Diversify equity exposure into broader AI themes: energy, materials, digital infrastructure.
Global preference for U.S. assets has held up, but can shift on a dime; we maintain a neutral ex-U.S. allocation.
AI is likely to remain the concentrated market driver, led by quality earnings and capex.
Elevated valuations make new deployments challenging; we see opportunities in large cap value, high-quality small caps, ex-U.S. developed markets, and short-duration credit.
Fed and fiscal policy should support risk-on positioning in 2026, though inflation risks are a “brake” on policy support.
For new equity allocations, diversify into financials, materials, AI-linked digital infrastructure, high-quality small caps, and developed ex-U.S. equity.
Move small-cap exposure to neutral, focusing on quality names benefiting from AI and policy tailwinds.
Maintain fully invested U.S. large-cap exposure, emphasizing earnings quality.
Alternatives
Private Markets
Fixed Income
Equity
We believe accommodative Fed and fiscal policy will support risk-on positioning in 2026, with upside inflation risks – both cyclical and policy-driven – acting as a “brake” on the extent of policy support.
Deploying new capital is difficult when valuations are this rich. We see opportunities for diversifying additions in U.S. large cap value and high quality small cap equities, ex-U.S. developed market equity, and short duration credit (for its equity-like risk characteristics).
AI is likely to remain a concentrated equity market driver, with a virtuous cycle of quality earnings growth and capital expenditures rewarded by the market.
Global preference for U.S. assets can turn on a dime, and ex-U.S. equity outperformance was a powerful diversifier in 2025. Higher fiscal spending and loan growth in Europe, along with a pro-growth policy direction in Japan, support an ongoing neutral allocation to ex-U.S. equities in 2026.
Private Markets
Fixed Income
Equity
Our
View
How to invest
Alternatives
How to invest:
Our View:
Within a core bond allocation, favoring structured credit. Within credit, maintaining an underweight position to floating rate bank loans.
Favor “buy-and-hold” short-duration corporate credit to benefit from quality while limiting exposure to rate-driven volatility.
We expect strong underwriting and credit discipline to pay in 2026, despite the potential for “junk” to outperform on the back of supportive liquidity and growth conditions.
The U.S. public and private credit cycle is maturing. Credit fundamentals remain strong, with no signs of systemic leverage or broad quality concerns.
Balance short-duration credit with longer-duration infrastructure debt, leaning into steeper municipal curves.
Keep IG / HY / muni credit shorter duration to manage rate and credit risk.
Alternatives
Private Markets
Fixed Income
Equity
Alternatives
Private Markets
Fixed Income
Equity
Our
View
How to invest
How to invest:
Our View:
Resilient growth, lower policy rates, and deregulation have increased deal flow.
Private markets allocation is growing and democratizing, contributing to competition for quality assets in large and mega deal terms.
Using resilient mid-market private credit and equity for qualified investor portfolios.
Alternatives
Private Markets
Fixed Income
Equity
Alternatives
Private Markets
Fixed Income
Equity
Our
View
How to invest
How to invest:
Our View:
Geopolitical shocks have become more frequent, influencing even traditionally “safe haven” U.S. assets.
Historically, commodities and gold have served as accretive portfolio diversifiers in eras of upside inflation surprise. We are not yet concerned about a double-peak in inflation, but expect cyclical factors – resilient growth and tariff policy shifts – as well as structural factors – supply chain re-globalization, AI infrastructure spend, and trends towards energy independence – to keep inflation sticky.
Hedging inflation and geopolitical risk with both gold and commodities allocations. Considering gold/precious metals/industrial metals as a 5-20% satellite sourced from equity.
Alternatives
Private Markets
Fixed Income
Equity
Alternatives
Private Markets
Fixed Income
Equity
Our
View
How to invest