Portfolio Perspectives // Q2 2026

Global markets were handed yet another curve ball during the first quarter of 2026 as tensions in the Middle East triggered an energy spike, driving oil prices higher and further complicating the inflation outlook. Even if and when the conflict eases, damage to energy infrastructure could take years to repair, increasing the risk of prolonged regional instability. Despite elevated volatility, global equities remained resilient, and the rotation that began in the second half of 2025 continued, with non‑US equities outperforming US markets, value stocks leading growth, and small caps outperforming large caps. Meanwhile, several mega-cap technology companies have faced pressure, as concerns over massive capital spending on AI infrastructure have overwhelmed strong revenue and earnings growth. In fixed income markets, expectations for additional Federal Reserve rate cuts have been scaled back amid higher energy prices and persistent inflation, reinforcing a “higher-for-longer” rate environment and highlighting the importance of strategic duration positioning. Nonetheless, public credit markets remain resilient even as private markets face concerns over several high-profile defaults, which has led to an increase in redemption requests, particularly among retail investors.

In this quarter’s edition of Portfolio Perspectives, we explore the practical applications for asset allocators in today’s complex market:

• How US Earnings Power Returns: Breaking down the drivers of equity returns, and why earnings remain the primary engine of long-term performance.
  
  
• Sectors in Transition – Technology and Financials: AI-driven capital spending is reshaping technology business models, while a potentially lighter regulatory backdrop could unlock capital flexibility and deal activity in financials.
  
  
• Minding Duration Risk in Portfolios: With rate cut expectations repriced and inflation risks persisting, we explore how shorter-duration and high-quality investment grade bonds may help mitigate volatility while still offering attractive yields.
  
  
• The Rise and Challenges of Private Credit: As liquidity pressures emerge in parts of the private lending market, we assess the implications for investors and the importance of understanding structural trade-offs.