Leadership doesn't stand still. Yesterday’s winners may feel like tomorrow’s leaders, but this quilt shows how quickly top performers can fall from favor. As seen here, commodities went from one of the top-performing asset classes in 2022 to one of the weakest performers in 2023. This rotation is hard to predict, and uncertainty is inherent to investing.

Artificial intelligence (AI) is prompting investors to rethink risk and asset allocation. Portfolios that look diversified on paper can still depend heavily on a narrow group of companies driving the current AI cycle.

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.