- Sector opportunities, as capital spending and new depreciation incentives support broader adoption of AI across industries such as healthcare, manufacturing, transportation, and financial services;
- Profitable US small- and mid-cap equities (SMID caps), which offer relative value and are positioned to benefit from lower interest rates and renewed merger and acquisition (M&A) activity;
- Emerging markets (EM), which remain meaningfully under-owned and undervalued relative to their weight in the global economy.
The past year was marked by the resilience of equity markets in the face of heightened policy and geopolitical uncertainty. Despite volatility triggered by tariffs, elections, and shifting monetary policy, companies adapted swiftly. Although market breadth did improve, performance was heavily concentrated at the extremes. Large-cap names tied closely to artificial intelligence (AI) surged, while small-cap non-earners rallied as the 10-year Treasury yield declined and financial conditions eased.
Looking ahead to 2026, headline index valuations remain elevated, but beneath the surface we see compelling opportunities that have room to move. Three areas stand out in particular:
