Seeking growth with positive impact
These model growth portfolios offer a broad range of diversified allocations with potential for attractive long-term total return and exposure to responsible investments.
Highlights
- The models had a strategic weight change, reducing U.S. equities for international equities. This asset allocation change was driven by three factors. First, our capital market assumptions forecast stronger returns in international equities over U.S. equities. Second, valuations (price-to-earnings ratio), particularly in emerging markets, are more attractive than the U.S. Finally, the U.S. equity market has become increasingly concentrated, with the top ten holdings of the Russell 1000 representing 32% of the market weight. We believe this shift provides a more diversified portfolio, and we remain neutral from a tactical stance.
- Equity markets rose during the second quarter. Within the U.S., the S&P 500 is up 3.0% as of September 23, 2026. Energy and information technology were the top performing sectors, rising 18.6% and 7.0%, while utilities and industrials were the laggards, down 11.7% and 8.0%. Value stocks have outpaced growth, returning 4.1% versus 1.0%, respectively. Internationally, emerging markets have outperformed developed markets, with returns of 2.0% and 1.2%.
- Treasury yields rose, with short to intermediate tenors seeing the largest increase. The 2-year and 5-year were up 72 and 78 basis points. High yield corporate spreads widened by 4 basis points and remain historically tight. High yield corporates outperformed investment grade, -0.64% versus -2.76%. The longer duration nature of investment grade negatively impacted the sector.
- Earnings in the U.S. continue to show resilience, with S&P 500 earnings growth forecasts of 20% for the next twelve months. Valuations based on the forward price-to-earnings ratio have modestly declined to 20.1x, as rising earnings growth have negated the impact of higher equity prices.
- The key measure that we are paying attention to is energy markets. Energy prices have climbed as the flow through the Strait of Hormuz is nearly nonexistent. Diesel prices have recently reached an all-time high. We are closely watching the impact that it may have on the broader economy, as diesel prices create a broad-based cost shock, striking transportation, agriculture and industrial activity.
