We are pleased to share our 2026 Asset Allocation Outlook: Uncharted Territory.
Key takeaways:
- The market environment appears to remain supportive of risk assets in 2026, underpinned by solid economic growth, lower interest rates, rising real wages, and healthy consumer and corporate balance sheets.
- AI investment is growing more complex and capital-intensive but improving models and expanding use cases suggest 2026 may mark a shift from experimentation to implementation, broadening the benefits and potential returns from AI beyond companies focused on the infrastructure buildout. We remain enthusiastic but cautious about the prospects of AI, closely monitoring returns on capital, valuation excesses, and AI’s implications for labor markets, energy, and long-term growth.
- Despite recent challenges for quality stocks, we remain committed to this style of investing and are finding attractive opportunities outside perceived AI winners as valuations in quality stocks have fallen relative to the broader market
- International markets and smaller companies remain key elements of diversification in our equity portfolios given their more attractive valuations and distinct return drivers. Japan remains one of our highest-conviction positions outside the U.S., and we continue to identify high-quality global companies listed in Europe and Asia to complement our U.S. holdings.
- We construct portfolios to perform across a wide range of outcomes by complementing core equity exposures with fixed income, infrastructure, private investments, and hedge funds to provide income, inflation protection and diversification benefits.
- Shifting tariff policies and their potential ongoing effects, geopolitical tensions, large fiscal deficits, historically elevated valuations, and unprecedented market concentration underscore the importance of diversified portfolios. This is largely uncharted territory, with both economic growth and markets increasingly beholden to the success of AI.
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Note: All commentary sourced from Brown Advisory as of 12/31/25 unless otherwise noted. Alternative Investments may be available for Qualified Purchasers or Accredited Investors only.