House Views – Growth upgraded to attractive; International developed markets raised to neutral

We’re upgrading our tactical view on growth to attractive from neutral and international developed markets (IDM) to neutral from less attractive—guided by our weight of the evidence framework.

Growth upgraded to attractive

Why now?

While the growth style has rebounded off April lows, it remains below the December peak, and the technology sector has been flat since last July—suggesting prices aren’t stretched. At the same time, fundamentals remain strong, relative earnings trends continue to make new highs, and we are seeing renewed technology (tech) and artificial intelligence (AI) leadership.

5 reasons behind the shift:

• Tech + AI are back
  The AI theme, which had taken a backseat to macro and trade-driven concerns in recent months, is once again asserting itself as a dominant market force.
• Earnings leadership
  Tech and communication services — the backbone of growth — are posting top-tier earnings trends.
• Spending stays strong
  Even if the economy slows, tech budgets should hold up. Falling behind in innovation isn’t an option.
• Price trends improving
  Growth's relative strength is increasing as it reclaims market leadership.
• Valuations still reasonable
  Large-cap tech valuations are reasonable on a relative basis, especially when accounting for earnings and strong profit margins.

International developed market raised to neutral

Why now?

The MSCI EAFE Index, a widely used proxy for International Developed Markets (IDM), recently broke above a multi-decade trading range—a constructive technical signal. While IDM has rebounded this year, it’s still up only 10% since its October 2007 peak, compared to a 290% gain for the S&P 500. Combined with improving macro and policy dynamics, the setup is more balanced.

Key Drivers Behind the Upgrade:

• Valuations remain compelling
  IDM trades at a discount to historical averages, offering a margin of safety after years of underperformance.
• Macro tailwinds are building
  Germany’s €1 trillion commitment to military and infrastructure spending is a long-term growth catalyst.
• Policy divergence favors IDM
  The European Central Bank (ECB) is providing more policy accommodation relative to the Fed—supporting liquidity and sentiment in European markets.
• Sector support from financials
  Higher yields and steeper curves are boosting financials, a key sector in IDM equity markets.
• Diversification + currency hedge
  IDM provides a partial hedge against U.S. dollar weakness and adds geographic diversification.

Potential risks:

• Macro uncertainty
  A sharper-than-expected economic slowdown could weigh on tech spending and global earnings; conversely, a stronger than expected economy could lead to a broadening out beyond growth.
• Regulatory pressure
  Big tech faces ongoing scrutiny that could impact profitability.
• Geopolitical instability
  Tensions in Europe, Asia, or the Middle East could disrupt IDM markets.
• Currency volatility
  A stronger U.S. dollar could erode IDM returns for domestic investors.

Bottom line:

This is a measured shift, not a call for aggressive repositioning. But the evidence now supports a modest tilt toward growth and a more neutral weighting in IDM and as part of a diversified global equity allocation.

Ultimately, your advisor understands your personal situation best and can help you determine how our high-level views may impact your portfolio.