Key Events: Strong Growth, steady inflation
Incoming data pointed to continued strong economic growth alongside inflation that, while steady, remains well above the Fed’s target. The Fed has continued to emphasize that interest rate decisions are driven by the incoming data; futures markets currently price approximately 2 further rate cuts in the coming year.1
Market Review: Market performance continues to broaden
Emerging markets led for the week yet again continuing the year’s trend. up over 40% for the last 12 months. US stocks underperformed amid rising geopolitical uncertainty. Technology stocks are a notable driver of large cap underperformance, highlighting the trend of broadening returns. The Magnificent-7 are down 0.5% for the year while small cap stocks are up 7.6% and emerging markets 6.9%.2
Outlook: Highlighting market risks and opportunities
The foundation supporting the current market outlook remains broad, as we outlined in our quarterly webinar: OneAscent Market Update: Q1 2026. While we remain constructive on return prospects across most asset classes, elevated valuations in large‑cap equities increase the potential for near‑term volatility.
The chart below highlights two specific areas of caution. First, hyperscale technology firms investing heavily in AI infrastructure are facing meaningfully higher borrowing costs, reflecting greater investor scrutiny of returns amid the ongoing AI investment cycle. Second, credit spreads have continued to narrow. Corporate bonds offer relatively modest yield premiums compared to government bonds.
Taken together, these risks reinforce the value of selectivity rather than signaling a lack of opportunity. A broad and diversified opportunity set continues to exist across equity and fixed income markets, both domestically and globally. Disciplined adherence to a long‑term, globally diversified portfolio remains an effective way for investors to navigate near‑term uncertainty while positioning for durable outcomes.
The markets are viewing the technology hyperscalers as an increasingly risky proposition
OneAscent Navigator Outlook: January 2025
This material is intended to be educational in nature , and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.[3]
[1] Source: Bloomberg
[2] Source: Bloomberg
[3] Market Returns reference the following indices: Large Cap – S&P 500, Mid Cap Growth – Russell Midcap growth, Mid Cap Value – Russell Midcap Value, Small Cap – Russell 2000, Developed – MSCI EAFE, Emerging – MSCI Emerging Markets, Aggregate – Bloomberg US Aggregate, High Yield – Bloomberg High Yield
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