Time for Tactical: The Era of “Easy Beta” May be Over

• All three Decathlon portfolio risk levels posted positive Q1 2026 returns (Growth: high single digits, Moderate: mid-single digits, Conservative: low single digits) while most investable assets had modest negative returns
• Since end of 2024, international stocks (MSCI ACWI ex US) have outperformed the S&P 500 by 27.95% to 10.66% through March 31, 2026, outperforming in all but one of the past five quarters
• The firm identifies multiple emerging risks including wealth effects from potential AI capital cycle deterioration, rising mortgage rates impacting housing markets, inflationary pressures from the Iran conflict, and potential instability in the private credit sector

Summary: Tactical Investing Gains Edge as Market Leadership Shifts

Key Performance: Decathlon portfolios delivered one of their strongest quarters historically in Q1 2026, with Growth up high single digits, Moderate mid-single digits, and Conservative low single digits—all positive while most assets posted modest losses.

Market Regime Change: The analysis suggests the "easy beta" era has ended. The "Magnificent 7" tech stocks have lost momentum after years of dominance, with these former leaders now driving markets lower. The firms argue markets are increasingly rewarding tactical strategies that can move between sectors rather than passively holding U.S. large-cap growth stocks.

Sector Rotation: Energy and natural resources were key outperformers, accelerating during the Iranian conflict. Despite weak fundamentals (high OPEC production, record U.S. output, weak Chinese demand), energy showed negative correlation to broader equity markets, providing portfolio diversification benefits.

International Outperformance: Foreign equities continued outperforming U.S. markets, extending a trend that began in late 2025. Since end-2024, MSCI ACWI ex-US returned 27.95% versus 10.66% for the S&P 500 through March 31, 2026, outperforming in four of five quarters.

AI Investment Concerns: Major tech companies (Alphabet, Amazon, Meta, Micron) announced increased AI spending but faced stock weakness, signaling market skepticism about excessive capital deployment despite rising AI utility.

Identified Risks: The report highlights wealth effects from market weakness, housing market stress from elevated mortgage rates, commodity-driven inflationary pressures from the Iran war, and potential private credit vulnerabilities with elevated redemptions.

Investment Thesis: The firm believes diversification opportunities are expanding as market performance broadens beyond mega-cap tech, favoring active tactical strategies that can quickly reallocate across sectors and geographies.