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Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re doing a year-end review and 2026 market outlook with Corrado Tiralongo, chief investment officer with Canada Life. We talked about equities, fixed income and we started by asking what structural trends really drove the year.

Corrado Tiralongo (CT): Looking at the structural trends that drove returns in 2025, if we strip away the weekly volatility, a few powerful forces stand out. The first was AI capital spending. Technology investment was massive, earnings across cloud and semiconductor ecosystems were strong, and productivity optimism supported equity leadership. That was the real signal. The second was real-yield dynamics. When real yields fell early in the year, multiples expanded. When they rose again, high-duration sectors pulled back quickly. Rate sensitivity reasserted itself. And the third was the fracturing of global trade. Tariffs, industrial policy, and a more inward-looking United States are now structural features of the global economy. These shifts are shaping supply chains and cost structures, not temporarily but durably. What was noise were the short bursts of rotation after CPI prints or policy headlines. Those moves were more about positioning, not fundamentals. The deeper drivers were productivity optimism, real-yield movements, and the structural reordering of trade.

Earnings growth versus multiple expansion

CT: At the start of the year, valuations did much of the work in driving equity performance. Multiples expanded as inflation cooled and markets anticipated rate cuts. But as the year progressed, earnings delivery took over. AI-linked businesses generated strong revenue growth, and broader markets saw firmer contributions from free-cash-flow generators. Looking into 2026, multiples have less room to run. Yields may remain stickier than investors hope. That shifts the burden of returns onto fundamentals, margins, capital discipline, and genuine productivity improvements rather than valuation expansion.

Concentration risk

CT: When we look at whether market leadership might broaden in 2026, the picture points to gradual, not dramatic, change. The mega-caps still have scale advantages and strong earnings power. But equal-weight indices are stabilizing. Quality cyclicals and industrials are participating more. And several non-U.S. markets are benefiting from different growth drivers. If AI moderates, we could see the classic pattern where the average stock outperforms even if the headline index consolidates. For advisors, it’s about maintaining exposure while using mandates that reduce concentration risk and reward capital discipline.

Expectations for the bond market

CT: When it comes to fixed income, the current environment supports a neutral-to-slightly-longer duration stance. Rates have dominated fixed-income returns all year. Central banks are easing, but slowly. Fiscal pressures are rising, and governments have incentives to keep long-term yields from moving too far, too fast. Real yields remain appealing. Duration is beginning to act as a diversifier again. And long-end volatility may remain contained by both policy and regulatory dynamics. This isn’t about calling the first cut. It’s about recognizing that bonds once again provide ballast.

Finding risk-adjusted opportunities

CT: When identifying the best risk-adjusted opportunities in fixed income for 2026, dispersion is increasingly the defining feature. Spreads remained tight in 2025 because fundamentals held up and demand for yield stayed strong. But dispersion is increasing. The best opportunities heading into 2026 look to be in short-duration investment grade and high-quality private credit. Both offer attractive yields with manageable downside risk. Active mandates that can rotate across sectors and quality buckets will be essential as dispersion widens.

Real assets and commodities

CT: When thinking about real assets in an environment where inflation moderates but remains structurally higher, the global backdrop matters. Supply chains are less global. Trade relationships are more fragmented. Tariffs and industrial policy are shaping cost structures in a way that increase nominal volatility. Real assets matter in that world. Gold offers a near-zero correlation to equities and remains a reliable hedge. Commodities absorb supply-side shocks. And inflation-linked bonds provide convexity when inflation surprises. These exposures belong in portfolios as strategic insurance, not as tactical inflation trades.

And finally, what’s the bottom line for investors planning for 2026?

CT: The bottom line for 2026 is that portfolios need to balance resilience with the ability to participate in opportunity. Growth will be uneven across regions, policy cycles are diverging, and the interplay between AI investment and global fragmentation creates a more volatile backdrop than we’ve been used to. So the plan for investors should be clear. Lean into quality across equities, rebuild diversification through intermediate-duration bonds, and maintain a consistent allocation to alternatives that behave differently when stock–bond correlations break down. Real assets also deserve a strategic role because the world now operates with more supply-chain friction and geopolitical risk. Above all, avoid concentration. We’re entering into a multi-polar environment where leadership rotates more quickly. A well-balanced portfolio with diversified sources of return is the best preparation for 2026.

Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Corrado Tiralongo of Canada Life. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.

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