Decoding semiconductor volatility

Inflation appears to have transitioned from its pre-Covid average of 2% to a stickier point closer to 3%, and we do not expect a near-term return to prior levels. In this environment, we believe real assets, such as commodities, infrastructure and REITs, can provide inflation protection, diversification and return potential.

As the S&P 500 approaches all-time highs, there are renewed concerns among investors about elevated valuations. However, historically strong profitability and expected earnings growth appear to support current pricing. In addition, the current S&P 500 price-to-earnings (P/E) ratio is roughly equal to the average since Covid. As a result, we do not view U.S. equities as being in bubble territory and we remain constructive on the asset class.

Leaders rotate in and out. No single fixed income sector consistently dominates performance over time, and strong performance in one sector rarely carries over from one year to the next. For example, emerging markets local debt and global bonds — two of 2024’s worst performers — rebounded strongly in 2025. Timing fixed income markets and predicting which sector will lead next is extremely difficult.

Market volatility is unsettling. When the market waters get rough, investors can be tempted to jump out to try to avoid short-term losses. But historically, some of the market’s biggest gains occur when volatility is highest, making them difficult to predict and easy to miss.