Navigating Tariffs, Rate Cuts, AI, and Market Concentration: Themes for 2025 and Roadmap for 2026

In this year-end episode of CIO Perspectives, Sid Ahl and Erika Pagel, Co-CIOs for Private Clients, Endowments and Foundations at Brown Advisory, are joined by two senior investment leaders at the firm: Sarge McGowan, CIO of U.S. Endowments and Foundations, and Christopher “Kif” Hancock, Brown Advisory’s CIO International. Together they reflect on the key surprises of 2025 and share how they are thinking about the opportunities and risks that could shape 2026.

The conversation begins with what markets have absorbed this year—from tariffs and shifting trade policy narratives to persistent inflation dynamics—yet still delivered strong returns. The group discusses the Federal Reserve’s pivot toward a slower pace of rate cuts, the uneven “K‑shaped” feel of the economy, and what elevated valuations and index concentration imply for future returns and diversification.

Artificial intelligence is a central theme throughout. Sid outlines how AI has moved from experimentation to implementation, with real-world productivity gains and continued investment in computing infrastructure. Kif adds a Europe-based perspective on the AI debate—emphasizing the need for humility in fast-moving narratives—while also highlighting how AI adoption could become a source of incremental productivity for regions facing structural growth challenges.

From there, the discussion turns to portfolio construction and implementation: global diversification (including Europe and Japan), the role of currency exposure, and why manager and strategy selection remain crucial in both public and private markets. The episode closes with a “round‑the‑horn” look at 2026 surprises—from a potential reopening of private equity exits to continued market concentration, the broadening of AI benefits beyond tech, and emerging themes like robotics.

---
The views and opinions expressed in this podcast 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 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 speakers on an objective basis to illustrate views expressed in the podcast 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 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 Materials 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 these types of investments. There can be no assurance that any investment objectives will be achieved, or that investors will receive a return of their capital. Accordingly, investors should only invest in private credit investments if such investors are able to withstand a total loss of their investment.

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. S&P®, S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a subsidiary of S&P Global Inc.

The Bloomberg Aggregate Bond Index is an unmanaged, market value-weighted index comprising 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. Bloomberg indices are trademarks of Bloomberg or its licensors. 

 The NASDAQ (commonly stylized as “Nasdaq”) most often refers to the Nasdaq Stock Market—an electronic securities marketplace/stock exchange where publicly traded companies’ shares are listed and traded. The Nasdaq Stock Market and related Nasdaq market names are trademarks of Nasdaq, Inc. Nasdaq marks and logos are owned by Nasdaq, Inc. Nasdaq stock symbols are proprietary to Nasdaq, Inc.

Terms and Definitions:

AI (Artificial Intelligence) refers to computer systems that can perform tasks typically requiring human intelligence, such as pattern recognition, language understanding and decision support.
Alpha measures the excess return of an investment relative to a benchmark index.
Beta measures a stock’s volatility compared to the overall market; a beta above 1 indicates higher volatility.
Capex (Capital Expenditure) refers to funds used by a company to acquire, upgrade, or maintain physical assets such as property or technology.
CPI (Consumer Price Index) is a measure of inflation that tracks changes in the prices paid by consumers for a basket of goods and services.
Downside capture (or downside capture ratio) is a performance measure that shows how much a fund/portfolio tends to decline relative to a benchmark during periods when the benchmark is down.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a financial metric used to evaluate a company’s operating performance by measuring profitability from core business activities

EPS (Earnings Per Share) is a company’s net income divided by its weighted-average shares outstanding, often used as a proxy for profitability.
Free Cash Flow (FCF) is the cash a company generates after accounting for cash outflows to support operations and maintain capital assets.
Net Debt to EBITDA is a leverage metric calculated as net debt divided by EBITDA, often used to assess balance sheet risk.
ROIC (Return on Invested Capital) measures how efficiently a company generates returns from the capital invested in its business.
Passive Investing is an approach that seeks to match (rather than outperform) an index’s return, typically through index funds or ETFs.
Alpha Extension Strategy is a portfolio approach that seeks market (index) exposure while using long/short or leverage techniques to pursue incremental alpha.
Tracking Error measures the divergence between a portfolio’s returns and its benchmark’s returns.
K‑shaped Economy describes an uneven recovery or growth pattern in which different segments of the economy experience materially different outcomes.
Hyperscalers are large cloud service providers offering scalable computing resourc...