Broadening Delivered. Now Prepare for Volatility.

Executive Summary

Our broadening thesis did not begin in 2026—it began more than 18 months ago.

In January 2025, we published “Get ready for a broader US equity market,” arguing that the extraordinary concentration in US mega-cap technology stocks was unlikely to persist indefi-nitely. While the Magnificent Seven¹ had become the dominant driver of market returns, we believed improving fundamentals across a much broader set of companies, sectors and regions would eventually support a healthier and more diversified bull market.

One year later, in January 2026, we expanded on that framework in “Broadening momentum: From US technology leadership to US small-caps and emerging markets,” moving from the broad idea of improving market breadth to identifying where we believed leadership would emerge: US small-caps, equal-weighted equities and emerging markets.

The past 18 months have largely validated that view. Rather than continuing to rely on an increas-ingly narrow group of mega-cap technology stocks, investors have been rewarded across a much wider opportunity set. Leadership has broadened across market capitalizations, invest-ment styles and global equity markets, with the MSCI Emerging Markets (EM) Index returning 62%, Russell 1000 Value Index 40% and Russell 2000 Value 39%, all comfortably outperforming the Magnificent Seven (25%) over the same period.

Today, however, investors face a different challenge. The broadening bull market remains intact, but after a powerful recovery from the March lows, markets are entering a more demanding phase. Earnings continue to provide strong support, yet liquidity² is becoming less accommodative, market leadership is becoming increasingly selective and volatility is likely to increase.

In our latest paper, we discuss the following:

• The broadening we expected has arrived
• Earnings became the engine
• Stock prices follow earnings over the long run
• AI has become an economic story
• The next phase will require more discipline
• Midterm election years: Volatile, but potentially opportunity-rich

Conclusion

The broadening bull market remains intact, in our view. Earnings continue to provide fundamental support, and global participation remains exceptionally strong. But after a powerful advance, we think the combination of higher valuations in parts of the market, tighter monetary conditions and increasing market dispersion argue for greater discipline.

This is a call to maintain discipline. Stay invested, diversified, and, if history is any guide, buy the pullback.

The next phase of the bull market is unlikely to reward concentration in a handful of expensive momentum stocks. Instead, we believe it is likely to favor investors who remain globally diversified, focus on earnings quality and maintain the flexibility to take advantage of the opportunities that periods of higher volatility inevitably create.

Stay invested. Stay diversified. Be ready.