Qian Wang: We are bullish on AI’s potential to transform the economy. But transformative technology needs profitable business models to win.

And, in the financial markets, returns hinge on expectations. Tech companies’ earnings have been strong so far, but their valuations may have gotten ahead of themselves. When expectations get too far out of whack, it is not surprising to see markets pull back.

Our long-term expected returns for non-U.S. stocks are higher than for U.S. stocks. Non-U.S. stocks had a strong rally in 2025, so the gap in future expected returns isn’t as great as it had been. But they still provide valuable diversification benefits.

Now, within the U.S. market, we expect muted returns for growth companies, but we’re more constructive on value stocks.

We don’t foresee the Fed cutting interest rates to a great degree in 2026, given our expectations for solid economic growth, sticky inflation, and a low unemployment rate. There’s also a higher neutral rate—the level that neither stimulates nor restricts economic activities.

We expect U.S. interest rates to be higher than consensus and higher than the rate of inflation, for longer. So fixed income will remain attractive even beyond the important portfolio diversification benefits that it offers.