AI Acceleration, Tariff Turnaround and the End of American Exceptionalism?

In this CIO Perspectives discussion, Sid Ahl, Erika Pagel and Sargent McGowan (CIO of Endowments & Foundations) analyze recent market resilience amidst significant uncertainty, including trade policy shifts, US deficits, and geopolitical tensions. Despite these challenges, equity markets have rallied, with notable sector rotation and international outperformance—Europe and China up over 20% year-to-date, and a broadening beyond US large caps. Tariff uncertainty, tech sector strength, and AI-driven earnings have underpinned the rally, while inflation and the Fed’s cautious stance add complexity. 

The panel highlights the importance of diversification, active management, and global exposure, particularly given elevated US valuations and regulatory uncertainty. They discuss the ongoing attractiveness of small caps due to valuation discounts and alpha opportunities despite structural headwinds and note a strategic increase in Japanese equities due to favorable valuations and corporate reforms. 

For endowment and foundation clients, liquidity and scenario planning are emphasized, along with maintaining long-term return targets through diversification—including hedge funds, private equity, and secondary market opportunities. Fixed income portfolios have shifted toward higher quality and shorter duration, with an eye on yield curve movements and government debt concerns. 

The team is also selectively increasing private credit and distressed allocations as supply-demand dynamics in private markets improve. Throughout, the CIOs stress disciplined asset allocation, tactical rebalancing, and the need to balance risk exposures, particularly in a market marked by rapid change and persistent uncertainty.

---
The views and opinions expressed in this video are those of the speakers and do not necessarily reflect those of Brown Advisory. These views are not intended to be and should not be relied upon as investment advice and are not intended to be a forecast of future events or a guarantee of future results. The information provided in this video is not intended to be and should not be considered to be a recommendation or suggestion to engage in or refrain from a particular course of action or to make or hold a particular investment or pursue a particular investment strategy, including whether or not to buy, sell or hold any securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. To the extent specific securities are mentioned, they have been selected by the author on an objective basis to illustrate views expressed in the commentary and do not represent all the securities purchased, sold or recommended for advisory clients. The information contained herein has been prepared from sources believed reliable but is not guaranteed by us as to its timeliness or accuracy and is not a complete summary or statement of all available data. This piece is intended solely for our clients and prospective clients, is for informational purposes only and is not individually tailored for or directed to any particular client or prospective client.

Alternative Investments may be available for Qualified Purchasers and Accredited Investors only. Private equity investments are characterized by a high degree of risk, volatility and illiquidity due, among other things, to the nature of the investments. A prospective investor should thoroughly review the Offering Memorandum pertaining to any investment, and carefully consider whether such an investment is suitable to the investor’s financial situation and goals. Investors should have the financial ability and willingness to accept the risks and lack of liquidity that are characteristic of the investments described in the Offering Memorandum pertaining to an investment opportunity. No assurance can be given that any such opportunity’s investment objectives will be achieved or that investors will receive a return of any of their capital. Investors should pay particular attention to the risk factors described in the Offering Memorandum pertaining to an investment opportunity. Prior to any investment, investors should take the opportunity to ask questions of and receive answers and additional information concerning the terms and conditions of the offering of interests and other relevant matters. Investors should inform themselves as to the legal requirements applicable to them in respect of the acquisition, holding and disposition of the interests and as to the income and other tax consequences to them of such acquisition, holding and disposition. Prior to acquiring an interest, a prospective investor should consult with its own legal, investment, tax, accounting and other advisors to determine the potential benefits, burdens, and other consequences of such investment.

Sectors based on GICS and GICS trademark language.

Index Definitions and Trademark Language:

The S&P 500® Index represents the large-cap segment of the U.S. equity markets and consists of approximately 500 leading companies in leading industries of the U.S. economy. The S&P SmallCap 600® Index seeks to measure the small-cap segment of the U.S. equity market. The index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable. S&P®, S&P 500® and S&P 600® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a subsidiary of S&P Global Inc. 

The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 1000® Growth Index tracks the performance of large-cap companies within the Russell 1000 Index that exhibit growth characteristics, such as higher price-to-book ratios and higher forecasted growth values. The Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell ® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication.

The MSCI ACWI Index captures large and mid-cap representation across Developed Markets (DM) and Emerging Markets (EM) countries. The Index covers approximately 85% of the global investable equity opportunity set. The MSCI ACWI captures large and mid-cap representation across Developed Markets (DM) and Emerging Markets (EM) countries. The index covers approximately 85% of the global investable equity opportunity set. MSCI Indexes and products are trademarks and service marks of MSCI or its subsidiaries.

The Bloomberg U.S. Aggregate Bond Index is an unmanaged, market-value weighted index composed of taxable U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate, asset-backed, and mortgage-backed securities between one and 10 years. 

The ISM Manufacturing Index, also known as the Purchasing Managers' Index (PMI), is a monthly indicator of U.S. economic activit...