House Views update: Reset in growth/tech valuations and yields creates an opportunity to deploy cash

We are further upgrading our view of the growth style relative to value from more attractive to most attractive. Growth remains dominated by the technology (tech) sector, where we have maintained a long-standing constructive view.

Exceptional earnings growth continues to support the sector, while valuations have become more favorable. The sector's forward price-to-earnings (P/E) ratio has retraced to levels seen during prior market shocks, including Liberation Day in 2025 and the oil shock at the onset of the Iran war. Notably, tech's P/E is now near where it stood around the launch of ChatGPT.

We are further downgrading international developed markets from less attractive to least attractive as it has recently made an 18-month relative price low versus the S&P 500, and relative earnings trends continue to deteriorate while valuations are neutral. These countries are also less insulated from higher energy prices.

We are upgrading high yield (HY) from neutral to more attractive. Higher yields, which are roughly 8.0% in the U.S. high yield space, make for an attractive entry point from a total return standpoint.

Current yield levels provide a meaningful cushion against modest spread widening or interest rate risk while offering the potential for equity-like returns with lower volatility over a full market cycle. We favor pairing HY with high-quality U.S. government and investment grade bonds

We are upgrading leveraged loans from least attractive to less attractive. Attractive yields, the asset class's floating-rate structure, and a higher-for-longer interest rate environment support a modestly more constructive outlook. However, software concentration and mixed credit spread signals prevent a more significant upgrade at this time.