Topic Tags: International Equity - Developed

1Q 2026 Market Insights Webinar

Please join Marquette’s research team for our 1Q 2026 Market Insights Webinar analyzing the first quarter across the economy and various asset classes as well as themes we’ll be monitoring in the coming months. This webinar will be recorded and posted to our website and YouTube channel afterward.

LOGISTICS

  • Register directly with Microsoft Teams using the email invitation sent April 2. Once you register, Microsoft will send an email confirming your registration that also contains the meeting link to join, plus a reminder one hour before the webinar starts.
  • Attend on Thursday, April 16, at 1:00pm CT. All attendees will be held in the webinar lobby until the presentation begins at 1:00.
  • Q&A will be open during the webinar using Microsoft Teams’ Q&A feature. Feel free to send any in advance to our team, too.

Our quarterly Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real assets, and private markets, with commentary by our research analysts and directors.

If you have any questions, please send our team an email.

The Passive Performance Podium

Performance is a key attribute of any investment strategy with a values-based or sustainability focus. As such, analyzing the 2025 returns of traditional indices and those of their ESG-integrated equivalents seemed like a worthwhile endeavor, especially given the 25th Winter Olympic Games currently taking place in Italy. The purpose of this assessment was to evaluate how ESG-oriented indices performed against traditional indices in the U.S. Large Cap, Emerging Markets, and Developed International equity spaces to determine the “passive performance medalists” of 2025.

Before evaluating returns, it is important to outline how ESG-oriented indices are constructed, given that a degree of tracking error is always to be expected from these benchmarks. According to MSCI, each ESG index seeks a risk and return profile that is similar to the broad market index it is designed to track, while also targeting improved sustainability characteristics and avoiding controversies. Of course, nuances exist across different flavors of sustainability indices. For instance, the “ESG Leaders” approach differs slightly from that of “ESG Focused” indices in that it overweights higher scoring ESG names against sector peers and utilizes additional screens. Key examples include the following:

  • MSCI USA Extended ESG Leaders Index: Applies exclusions related to alcohol, Arctic oil and gas production, controversial weapons, nuclear power, palm oil, thermal coal, tobacco, fossil fuel extraction, and gambling.
  • MSCI Emerging Markets ESG Focus Index and MSCI EAFE Extended ESG Focus Index: Both apply exclusions related to civilian firearms, controversial weapons, tobacco, thermal coal, and oil sands.

The time has now come to award the medals. In the U.S. Large Cap space, the ESG Leaders approach landed atop the podium in 2025, as overweight positions in best-in-class Communication Services companies proved fruitful last year. Within Emerging Markets, the MSCI EM ESG Focus Index took home gold with the highest absolute outperformance thanks to positive stock selection effects in sectors including Information Technology, Health Care, and Energy (where being underweight also contributed to excess returns). Finally, a photo finish determined the gold/silver outcome for traditional indices in the EAFE space. The MSCI EAFE ESG Index trailed the two traditional benchmarks due to its weapons-related exclusions and lower exposure to companies in construction and mining spaces, which hampered relative returns given Europe’s increased focus on defense and infrastructure.

The fact that passive ESG indices fared well outside of the EAFE space in 2025 serves as a reminder that funds that track these benchmarks may make sense for the following types of market participants:

  • Mission-aligned investors who do not see their values fully reflected in certain segments of their portfolios
  • Purpose-driven or traditional investors who may consider passive vehicles as placeholders before identifying a viable active manager

It is important to note that understanding the nuances of different ESG-focused products is crucial, as many involve exclusions, additional risk management levers, and screens that will create absolute and relative performance variability. Still, if a lesson can be learned from 2025, it is that investors can enjoy strong performance from passive equity strategies while also tilting toward securities with more sustainable characteristics.

Seventy-Five Horses and Two Pieces of Plastic

Anyone who has gone snowmobiling knows it can be simultaneously exhilarating and terrifying. Throttling across snow and through a forest powered by a 75-horsepower engine with two plastic skis to steer makes it hard to feel like one has complete control; 30 mph in the open air feels more like 100!

Nonetheless, operating a snowmobile is pretty straightforward: The throttle is a right-thumb button, the brake is a left-hand squeeze lever. Beyond those two controls, it’s up to the driver to effectively navigate the trail, with the critical concession that the terrain is out of anyone’s complete control. Which brings me to our 2026 market outlook.

The “throttles” for portfolios are the usual constituents: equities, below investment grade credit, and private markets. The “brakes” are investment grade fixed income, particularly Treasuries which can slow a portfolio’s losses if the market tumbles. The terrain is naturally the actual path that each of these asset classes will follow in 2026. Since 2022 the equity market ride has been mostly exhilarating, save for some of the terrifying moments like the market dip after Liberation Day. But that’s in the rearview mirror, and the focus is what is around the bend. Will the thrill continue, or should we ease up on the throttle?

2026 Market Preview

This video is a recording of a live webinar held January 15 by Marquette’s research team analyzing 2025 across the economy and various asset classes as well as themes we’ll be monitoring in 2026.

 

Our quarterly Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real assets, and private markets, with commentary by our research analysts and directors.

Featuring:
Greg Leonberger, FSA, EA, MAAA, FCA, Partner, Director of Research
Frank Valle, CFA, CAIA, Associate Director of Fixed Income
James Torgerson, Senior Research Analyst
Catherine Hillier, Senior Research Analyst
David Hernandez, CFA, Director of Traditional Manager Search
Evan Frazier, CFA, CAIA, Senior Research Analyst
Dennis Yu, Research Analyst
Amy Miller, Associate Director of Private Equity
Chad Sheaffer, CFA, CAIA, Associate Director of Private Credit

Sign up for research alerts to be invited to future webinars and notified when we publish new videos.

If you have any questions, please send our team an email.

Brains Over Brawn?

The development of artificial intelligence is advancing along two largely distinct paths. The first centers on generative AI powered by large language models, with the long-term objective of creating systems that can reason across domains at levels superior to those of human beings. The second focuses on embodied intelligence (i.e., robotics). In this space, the objective is not abstract reasoning but rather the deployment of capable machines that can operate effectively in the physical world. Over the last five years, capital and attention have overwhelmingly gravitated toward companies involved in generative AI, with the Bloomberg Artificial Intelligence Index up a staggering 276% in that time. Robotics, by comparison, has been widely viewed as a longer-dated theme, with the Bloomberg Robotics Index up only 77% over that same period (even less than the S&P 500 Index return of 134%). These dynamics can be observed in this week’s chart.

Going forward, there are reasons to believe that this performance trend may shift in the years ahead. For instance, human-level general intelligence could be far more distant than markets currently assume, and language models may not prove sufficient to reach it. At the same time, practical robots (e.g., warehouse automation, humanoid assistants, etc.) appear closer to commercial reality than previously believed, particularly in aging societies facing persistent labor shortages. One possible accelerant for robotics companies in the years ahead is the use of advanced simulation. By training in virtual environments, robots can acquire motor skills and coordination far more rapidly than through physical trial and error alone, potentially pulling forward adoption timelines relative to current investor expectations. Importantly, transformative impact does not require robots to achieve artificial general intelligence but rather functional capability (i.e., the ability to move objects, operate safely, and sustain useful work with sufficient battery life). Commercial momentum in robotics is already building. In 2024, for example, Agility Robotics opened a manufacturing facility in Oregon with capacity to produce up to 10,000 humanoid units annually, and Amazon has now begun testing Agility’s robots in its warehouses. Additionally, companies like Tesla are showcasing humanoid prototypes performing increasingly fluid physical tasks, and BYD has signaled interest in future household robotics. While price points remain prohibitive for mass adoption today, several structural forces are converging to improve the economics of robotics. Manufacturing costs are declining as scaling drives down prices for components like sensors and actuators, while improvements in AI models are enhancing robotic perception and control. Taken in tandem with the fact that generative AI leaders are currently investing heavily in costly, power-hungry data centers, it is fair to say that a once slower-moving, less glamorous segment of the AI ecosystem may now benefit from relative capital efficiency.

Despite these developments, markets continue to assign a significant valuation premium to generative AI over robotics, which can also be observed in the chart above. Factor analysis helps explain part of the gap, as AI-heavy indexes skew toward momentum and growth while robotics-oriented benchmarks exhibit greater exposure to value, quality, and, in some cases, even dividend income. Further, the generative AI complex is dominated by large technology platforms including Alphabet, Microsoft, and NVIDIA, whereas robotics companies tend to be more industrial in nature (e.g., automation specialists, automakers, and emerging consumer-robotics firms). This valuation disconnect suggests that investors may be overemphasizing long-term breakthroughs in cognition while underappreciating near-term progress in physical automation, especially as physical robots transition from research environments into factories, homes, and hospitals. Indeed, while much of today’s excitement centers on artificial brains, it may ultimately be robotic brawn that drives the next leg of growth within the technology sector.

Glass Half Empty

While the holiday season was once marked by bustling bars, readers may notice that nightlife isn’t what it used to be. Indeed, alcohol-oriented companies, long considered stable components of the Consumer Staples sector thanks to recession-proof attributes, are struggling to regain momentum after a post-pandemic boom. As can be seen in this week’s chart, the Bloomberg Global Alcohol Index, which tracks over 50 of the world’s top listed beer, wine and spirits producers, has exhibited a roughly 46% decline since the summer of 2021. Shares of European giants such as Diageo, Pernod Ricard, and Remy Cointreau now hover near multi-year lows, with many global peers notching similar declines.

There are likely many factors contributing to these performance headwinds for alcohol-oriented businesses, including rising costs, post-pandemic societal shifts (i.e., higher levels of solitude), and healthier lifestyle choices being pursued by consumers. Interestingly, a recent Gallup survey indicates that alcohol consumption by U.S. adults sits at a staggering 90-year low, with members of the Millennial and Gen-Z cohorts increasingly viewing drinking as less fashionable. This change in behavior is compounded by the rise of GLP-1 drug use for weight loss, as early indicators suggest that these medications are catalyzing behavioral changes that have led to a greater emphasis on health and well-being. Additionally, the options for partygoers outside of alcohol have rapidly expanded in recent years, with global consumers increasingly turning to non-alcoholic beverages and cannabis to fuel their holiday cheer. While demand for alcohol is unlikely to disappear completely, alcohol-oriented businesses will surely need to innovate and diversify to meet changing consumer preferences based on the trends described above.

3Q 2025 Market Insights

This video is a recording of a live webinar held October 22 by Marquette’s research team analyzing the third quarter across the economy and various asset classes as well as themes we’ll be monitoring through the rest of 2025.

Our quarterly Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real assets, and private markets, with commentary by our research analysts and directors.

Featuring:
Greg Leonberger, FSA, EA, MAAA, FCA, Partner, Director of Research
Frank Valle, CFA, CAIA, Associate Director of Fixed Income
James Torgerson, Senior Research Analyst
Catherine Hillier, Senior Research Analyst
David Hernandez, CFA, Director of Traditional Manager Search
Evan Frazier, CFA, CAIA, Senior Research Analyst
Dennis Yu, Research Analyst
Amy Miller, Associate Director of Private Equity

Sign up for research alerts to be invited to future webinars and notified when we publish new videos.

If you have any questions, please send our team an email.

2025 Investment Symposium

Watch the flash talks from Marquette’s 2025 Investment Symposium livestream on September 26 in the player below — use the upper-right list icon to access a specific presentation.

 

Please feel free to reach out to any of the presenters should you have any questions.

The Impact of Artificial Intelligence on Markets

Over the last several decades, artificial intelligence (“AI”) has evolved from a theoretical concept into a transformative force across a variety of industries. The 1940s saw the advent of the digital computer, which was followed years later by the first artificial neural network, a computational model inspired by the structure of the human brain that consists of algorithms that attempt to recognize relationships in data. In more recent years, researchers have developed “deep learning” systems (i.e., neural networks with many layers) capable of increasingly complex tasks including image recognition, reading comprehension, and predictive reasoning. Given the advances in the space, it should not come as a surprise that the use cases of artificial intelligence are now vast, with AI tools now implemented across fields including health care, retail, finance, and entertainment. Researchers and corporate executives are not the only ones to have noticed the remarkable potential of AI, however, as investors have flocked to the space in droves over the last several years.

This newsletter outlines the growth of AI as an investment theme, including performance, valuations, and earnings growth of AI-related companies and equities, other segments of the market that may stand to benefit from advances in AI, and potential risks for investors.

3 vs. 2000

In last year’s “2 vs. 2000” Chart of the Week publication, we explored the emergence of trillion-dollar companies, noting that Microsoft and Apple had each exceeded the combined market capitalization of Russell 2000 Index constituents. Since then, another technology giant has crossed that threshold, with NVIDIA recently becoming the first company to reach a market capitalization of $4 trillion. While Microsoft currently hovers around this level thanks to robust earnings and demand for its cloud and enterprise solutions, Apple has experienced more turmoil in recent time. In the first three months of this year, Apple shed nearly $1.5 trillion from its market capitalization amid trade tensions and concerns about slowing growth. During this bout of volatility, the company briefly became smaller than the U.S. small-cap equity universe, but a rally sparked by its announcement to bring manufacturing back to the U.S. helped Apple regain its footing and once again surpass the Russell 2000 Index in terms of market capitalization.

The meteoric rise of Apple, Microsoft, and NVIDIA underscores ongoing investor preferences for large-cap, technology-focused companies. In contrast, the U.S. small-cap space, which is more tilted toward businesses in sectors like Financials and Industrials, has struggled in recent years for this same reason. The Russell 2000 Index has also been negatively impacted by the realization of smaller company growth within private markets, as outlined in a recent newsletter. Going forward, investors should be cognizant of the risks posed by both large and small companies and remain adequately diversified across the market capitalization spectrum.