In the following collection of charts, we a) reaffirm our belief that supportive macroeconomic and capital-markets forces have the potential to drive further equity gains; b) address what we view as some of the more important risks to our thesis (including potential drawdowns that tend to accompany mid-term election years, as well as rising bond market volatility); and c) offer tactical portfolio guidance across various equity markets.
Key considerations, in our view, include:
- Size: remain overweight Small Caps vs Large Caps
- Style: overweight High Quality vs Low Quality
- Regions (relative to MSCI ACWI): remain overweight ex-U.S. vs U.S.; upgrade India from underweight to overweight; and maintain overweights in China and Japan.
The Quick Case for Seeking High Quality
Over the last four decades, higher-quality stocks have consistently and significantly outperformed lower-quality stocks (see the left chart below). Yet there have been daunting exceptions: Six times during that same 40-year span, low-quality stocks have outpaced high-quality stocks by a median of 30% over 13 months (see the right chart). While timing low-quality mini-cycles with precision is hard, we believe we are in the later innings of the most recent low-quality run.
Higher Quality Has Tended to Outperform Over the Long Term, But It Has Been Occasionally Trounced By Low-Quality Runs That Have Lasted About a Year
Source: Neuberger, Fama French Database and FactSet; data as of October 30, 2025. Past performance is not indicative of future results. For illustrative and discussion purposes only. Nothing herein constitutes a prediction or projection of future events or future market behavior. Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed
For a deeper dive into the entire collection of charts and analysis, please download our full report.
