Stock pickers aiming to beat the market face high underperformance rates of U.S. large-cap mutual funds against the S&P 500. Asset management firms like Pimco and State Street Investment Management discuss strategies for generating alpha at a broader portfolio construction level beyond large-cap stocks.
Amid market volatility, seeking diversification and making tweaks to portfolios may boost 2026 returns. State Street’s Matthew Bartolini highlights the opportunity to generate portfolio construction alpha by managing cash more effectively. Pimco’s Jerome Schneider emphasizes the potential for enhanced cash accounts to outperform traditional cash accounts.
Investors can seek additional returns through bonds without aiming to beat the S&P 500. Pimco offers the SPLS ETF combining passive S&P 500 exposure with active fixed income strategies. Schneider advises looking beyond U.S. markets and diversifying fixed-income exposure, citing divergent monetary policy paths globally.
Improving traditional portfolio design doesn’t mean abandoning the U.S. market but exploring additional asset classes to buffer risks. State Street’s ALLW ETF invests across global equities, bonds, inflation-linked bonds, and commodities. Bartolini advocates blending assets like gold, silver, and platinum to address overexposure to U.S. equities.
Rotating rather than wholesale risk aversion can involve reducing the allocation to U.S. large-cap stocks and exploring small-cap equities. The Russell 2000 Index has outperformed the S&P 500 recently, driven by improving earnings expectations for 2026 and renewed interest in small-cap stocks. Bartolini emphasizes the importance of diversification and balance in portfolio construction. 1. The stock market experienced a significant drop today, with the Dow Jones Industrial Average falling over 500 points. Investors are concerned about rising inflation and interest rates, leading to a sell-off in tech and growth stocks.
2. A new study has found that the Pfizer-BioNTech COVID-19 vaccine is highly effective in preventing severe illness and hospitalization caused by the Delta variant. The data suggests that vaccination remains crucial in controlling the spread of the virus.
3. The United Nations has issued a dire warning about the impact of climate change, stating that the world is facing a “code red for humanity.” The report highlights the urgent need for global action to reduce greenhouse gas emissions and limit temperature rise.
4. Apple has announced plans to scan iPhones for child sexual abuse images using a new system called NeuralHash. While the company says this is a step towards protecting children, critics have raised concerns about privacy and potential misuse of the technology.
5. The Tokyo Olympics have come to a close, with the United States finishing at the top of the medal table. Athletes from around the world showcased their talents in various sports, despite the challenges posed by the COVID-19 pandemic.
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