April 02, 2026

Key takeaways

• The last 10 years have delivered strong returns from a narrow set of drivers. US equities—particularly technology and AI—led performance, and their large index weightings meant strong returns were captured by most investors.
• We are now seeing early signs of a shift toward broader market leadership. Returns are expanding across regions, sectors, and asset classes.
• The next 10 years are likely to require a more balanced approach to investing. We expect equity returns to moderate, traditional bonds to offer less protection, and alternative assets to regain significance.
• Portfolio construction and active decision-making are expected to play a more meaningful role in delivering returns and managing risks in this environment.

Over the past decade, markets navigated a wide range of crosscurrents—from a global pandemic to an inflation shock and rapid interest rate changes. Despite this complexity, the outcome was relatively consistent. However, strong returns were driven by a narrow group of assets, not broad market participation.

Performance became increasingly concentrated in a small group of United States (US) companies, led first by large-cap technology firms and more recently by those tied to artificial intelligence (AI). As these companies grew to dominate market indices, driving a disproportionate share of overall returns, many other areas—including international equities, emerging markets, and real assets—lagged over much of the period.

This pattern was not limited to equities. Fixed income returns were also uneven. Traditional bonds delivered modest returns and struggled when interest rates rose in 2022, with core bonds returning 2%. Higher-yielding segments, such as high yield bonds, performed more strongly at 5% due to their higher income and lower sensitivity to rate changes.

Context on recent Middle East conflict

In March, escalating conflict in the Middle East contributed to a setback in equity markets, with global equities down approximately 6% at the time of writing. Markets are currently assuming that the impact on economic growth and corporate earnings will be limited, and that any increase in inflation will be temporary, with central banks likely to look through near-term price pressures. Bond markets appear less certain on this last point. Should these assumptions change, we would expect a more meaningful—though likely temporary—correction in equity markets.

The shift toward broader leadership

Over the past year, we have started to see early signs that the concentration dynamic may be changing. Market performance has begun to broaden, with stronger returns emerging across a wider set of regions, sectors, and asset classes.

Outside the US, markets such as Canada and emerging economies have contributed more meaningfully to returns over the last year. Within equities, leadership has expanded beyond a narrow group of mega-cap companies to include other cyclicals and more defensive stocks. At the same time, real assets—including gold—have re-emerged as important contributors. While still early, these developments suggest the drivers of returns may be becoming more balanced.

The next 10 years: a lower-return environment with greater variation within markets

Looking ahead, our long-term forecasts point to a different investment environment than the one investors have experienced over the past decade. Equity returns are likely to be more moderate, reflecting higher starting valuations despite a still supportive economic backdrop.

At the same time, traditional bonds may offer less protection than they did in the past, particularly in an environment where inflation remains above pre-pandemic norms and fiscal policy plays a larger role in driving economic outcomes. In this context, alternative assets—including real assets and private market exposures (such as infrastructure)—may play a more important role in supporting diversification and return potential. Overall, the opportunity set is likely to be broader, but also more complex to navigate.

Why portfolio construction and active decisions matter more

As returns moderate and differences within markets increase, portfolio construction is likely to become a more important driver of outcomes. While a broader set of assets may contribute to returns, performance across sectors and themes is likely to be less uniform—making simple market exposure through passive strategies less effective than in the past.

This backdrop places greater emphasis on diversification across regions, sectors, and asset classes, as well as on deliberate allocation decisions. Active management—both at the asset allocation level and in security selection—is likely to play a larger role in navigating a more fragmented and less forgiving market environment.

As a result, generating returns while managing risk may become more challenging. In anticipation of this shift, we have evolved our investment platform to better navigate a more complex backdrop.

Within fixed income, we have expanded our opportunity set, particularly in higher-yielding segments, to better navigate a regime of structurally higher yields. We have also increased flexibility within our high yield strategies to enhance both return potential and risk management. In addition, we have broadened our exposure beyond North America to include emerging market credit, where inefficiencies are greater and correlations with domestic markets are lower.

In equities, we have restructured our flagship strategy to integrate Canadian and global opportunities and introduced a quantitative capability to complement our fundamental teams. We have also enhanced our ability to act more dynamically in asset allocation decisions.

At the total portfolio level, we are incorporating longer-term structural opportunities and expanding our use of forward-looking indicators to better anticipate shifts in regional leadership. Looking ahead, we plan to introduce systematic strategies that apply disciplined, rules‑based methods to take advantage of recurring market patterns.

These enhancements reflect a multi-year research effort by our total portfolio management team. The objective is clear: to improve the balance between return generation and risk taken. Opportunities remain, but capturing them will require being more selective in where and how risk is taken, along with increased flexibility.