The Rotation Has Been Underway. The Case for Thoughtful Diversification Grows Stronger

Despite early volatility driven by global bond market stress, tariff-related tensions, renewed inflation concerns, and uncertainty surrounding Federal Reserve leadership, equities finished January higher, with the S&P 500 reaching new all-time highs. On the back of strong economic data and earnings, market leadership broadened beyond mega-caps as the S&P 500 Equal Weight Index (+3.4%) outperformed its market cap-weighted counterpart (+1.5%). International developed equities (+5.8%) led gains, followed by US small-caps (+5.5%) and emerging market equities (+5.1%). Bonds mostly fared well as municipal bonds rose 0.7%, high yield credits gained 0.6%, and Treasury Inflation Protected Notes increased 0.5%. Commodities produced strong positive returns as silver was up 17.1%, crude oil gained 15.0%, gold rose 12.3%, and broad-based commodities increased 11.2%.