- Equity Strategist
United States, Intermediary
Change
highlight_off
Thank you for your registration
You will shortly receive an email with your unique link to our preference center.
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
As we roll into spring in the northern hemisphere, investment themes that were hard to see in 2023 now appear on the verge of blossoming.
1. Breadth is back
The “Magnificent 7” made up less than 20% of the S&P 500 Index at the start of 2023. That group drove two-thirds of 2023’s performance and has continued to outpace the Index in 2024. Market concentration now stands at a 50-year high, with that group now composing nearly 30% of the Index.
That trend, however, looks like it is starting to crack. We are down to the “Magnificent 5,” with Tesla and Apple posting negative returns for the year to date. We observed increased market breadth late in 2023 and expect to see breadth improve as 2024 progresses, largely through improved returns for the “S&P 493” along with small- and mid-cap stocks.
Historically, concentration has increased during periods of economic uncertainty. As macro uncertainty abates, market breadth improves. That’s exactly what we are seeing today, with expectations of a hard landing shifting to expectations of a soft landing, and perhaps no landing at all. This may be an ideal time to consider extending equity allocations, with the flexibility to neutralize risks posed by concentrated markets should this take time to unfold fully.
2. In the US, small is big again
We are forecasting a combination of modest growth and moderating inflation and interest rates. That should be an increasingly favorable environment for small- and mid-cap stocks, which dramatically lagged in 2023 and have materially lagged index returns for most of the past 13 years. Small caps have not been this undervalued relative to large caps since the dot-com bubble.
Adding to that, the small- and mid-cap universes have become increasingly inefficient given less sell-side coverage, more ETF trading, and the rapid increase in unprofitable small caps in the Russell 2000 following the SPAC boom of 2020 – 2021. The upshot is that not only do we believe small- and mid-caps are on the verge of a period of outperformance, but we also think these conditions will be favorable for active managers.
3. Time to find value in “Value”
Like small caps, value has meaningfully lagged in 2023 and for most of the past decade (although value outperformed in Europe and Japan in 2023). That underperformance has continued in 2024. That has caused US market indices to become not only more concentrated with mega-cap stocks, but also in terms of sector and factor. For clients benchmarked against these indices, their exposures are increasingly tilted toward these areas. And given the US’s large weight in global indices, this concentration is present in global portfolios as well.
Since many client portfolios have become skewed toward growth from market action, and therefore exposed to the risk of a reversal, value stocks provide an attractive combination of upside potential and portfolio diversification. Value allocations can be oriented toward quality, thematic or individual opportunities, or dividends for those seeking income as rates begin to moderate.
4. Japan — it is different this time!
Japanese nominal GDP growth was near 0% for 30 years. It is now in the 3% – 5% range. The economy appears to be leaving behind the deflationary environment that has dogged it for years, helped along by robust wage growth and corporate pricing power. Investors have also been encouraged by corporate reform measures that are taking hold in earnest, with companies increasingly focusing on return on capital. The corporate reform story is real and still has many years to play out.
These material changes are in the context of, in our view, reasonable valuations. Even after its year-to-date gains, Japan’s equity market is at its median valuation on 20-year history and is priced at two-thirds the multiple of the US. All told, we believe this remains an attractive entry point for what continues to be a fundamentally driven rally.
Expert
Related insights
Showing
of
Insights Posts
Article
3 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
The power of Asia’s dividends
Continue reading
event
3 min
Article
2026-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
7 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Broadening underway? 6 equity ideas for 2026
Continue reading
event
7 min
Article
2026-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
7 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Low tide, sharp eyes: What to pick up
Continue reading
event
7 min
Article
2026-11-03
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
8 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Finding durable value amid shifting currents
Continue reading
event
8 min
Article
2026-11-26
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Opportunity ahead: Optimism or illusion?
Continue reading
event
Article
2026-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
5 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
What does the new economic era mean for equities?
Continue readingBy
event
5 min
Article
2026-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
URL References
Related Insights
Stay up to date with the latest market insights and our point of view.
highlight_off
Thank you for your registration
You will shortly receive an email with your unique link to our preference center
Read next
Showing
of
Insights Posts
Article
3 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
The power of Asia’s dividends
Discover Asia’s quality dividend potential. With diverse income sources, structural tailwinds, and governance reforms at play, Asia offers a compelling mix of income, resilience, and long-term growth potential.
event
3 min
Article
2026-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
7 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Broadening underway? 6 equity ideas for 2026
Andrew Heiskell and Nicolas Wylenzek see 6 key themes ahead for equity investors in 2026, including the durability of the AI investment cycle, the broadening of earnings growth beyond mega-caps, the potential for renewed value in international diversification and the growing need for equity investors to rethink risk hedging beyond bonds.
event
7 min
Article
2026-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
7 min
Fixed income
Outlook
Content CoE Program Global Program
Equity
Multi-asset
Commodities
Liquid alternatives & hedge funds
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Low tide, sharp eyes: What to pick up
Fixed Income Managers Campe Goodman and Rob Burn share their outlook for credit in 2026 and discuss how investors can reposition for an environment where opportunities are harder to find.
event
7 min
Article
2026-11-03
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
8 min
Fixed income
Outlook
Content CoE Program Global Program
Equity
Multi-asset
Commodities
Liquid alternatives & hedge funds
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Finding durable value amid shifting currents
Fixed Income Strategist Amar Reganti and Investment Director Marco Giordano explore how to approach bond investing in 2026. They see durable value for investors who can flexibly adjust to the shifting currents ahead.
event
8 min
Article
2026-11-26
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
Outlook
Macro and market
Portfolio strategy
Equity
Fixed income
Multi-asset
USA
APAC
EMEA
Emerging markets
Active management
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Opportunity ahead: Optimism or illusion?
Explore our latest views on risks and opportunities across global capital markets.
event
Article
2026-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
18 min
Economic cycle
Market commentary
Monthly Market Review
Institutional Program
Macro and market
Fixed income
Multi-asset
Commodities
Liquid alternatives & hedge funds
Equity
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Monthly Market Review — October 2025
A monthly update on equity, fixed income, currency, and commodity markets.
event
18 min
Article
2026-11-20
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
5 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
What does the new economic era mean for equities?
The twists and turns of 2025 have reinforced the sense that the global economy is undergoing a structural shift — towards higher inflation, more volatile business cycles and a potential gradual unwinding of decades-long globalisation. However, with flexibility and careful positioning, there are reasons to be positive about the outlook for global equities
By
event
5 min
Article
2026-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
8 min
Macro and market
Outlook
Content CoE Program Global Program
Equity
Fixed income
Multi-asset
Commodities
Liquid alternatives & hedge funds
Macro
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Investing in 2026: prepare for inflationary growth
Macro Strategists John Butler and Eoin O'Callaghan share their annual macro outlook and discuss likely implications for markets and investors. They outline four potential scenarios graded by level of probability.
event
8 min
Article
2026-11-15
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Video
5 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Rapid Fire Questions with Philip Brooks on Asian equities
In this edition of “Rapid Fire Questions,” Philip Brooks, investment director and equity strategist, answers key questions on Asian equities—exploring the structural drivers of the asset class, the traits of quality businesses, and the most compelling quality dividend opportunities today.
event
5 min
Video
2026-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Article
3 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Chart in Focus: Is AI a bubble, or is it driving real market value?
AI isn't just about the hype. Our experts explain why this innovation is driving real market value and lay out the investment implications.
event
3 min
Article
2026-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Infographic
2 min
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Chart in Focus: Is the Fed rate cut positive for risk?
In this edition of Chart in Focus, we examine how the Fed’s long-awaited interest rate cut may influence risk assets.
event
2 min
Infographic
2026-10-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
URL References
Related Insights
contact us
legal Information
© Copyright 2025 Wellington Management Company LLP. All rights reserved. WELLINGTON MANAGEMENT ® is a registered service mark of Wellington Group Holdings LLP. For institutional or professional investors only.
Enjoying this content?
Get similar insights delivered straight to your inbox. Simply choose what you’re interested in and we’ll bring you our best research and market perspectives.
highlight_off
Thank you for joining our email preference center.
You’ll soon receive an email with a link to access and update your preferences.
Monthly Market Review — October 2025
Continue readingBy