written by Tony DiBartolomeo, DWA Portfolio Manager

Addressing Your Top Investment Questions from Q4

Over the course of our Q4 conversations last year, a few common questions came up repeatedly. Two stood out in particular: concerns about technology exposure and the narrative around an AI bubble. There were also broader questions about our investment philosophy and approach to risk management. All are timely, thoughtful, and worth addressing directly.

Below, we share our perspective on how these issues played out in 2025 and what they reinforce about how we construct and manage portfolios.

Technology Exposure and the AI “Bubble” Narrative

One of the most frequent concerns we heard was whether technology has become too large a component of equity markets—and whether artificial intelligence is showing signs of speculative excess.

A helpful starting point is understanding how 2025 differed meaningfully from 2024. In 2024, market returns were highly concentrated. A disproportionate share of equity performance came from a small group of mega-cap technology companies often referred to as the “Magnificent Seven.” Early in 2025, that pattern initially continued. As the year progressed, however, market leadership broadened in a significant and healthy way.

By the end of 2025, returns were no longer dominated by a handful of large technology names. Instead, performance was driven by a much wider set of companies, with notable strength across sectors such as financials, industrials, and healthcare. This kind of broad-based participation is an important signal of market health—it reduces the risk that returns are being fueled primarily by speculation in a narrow group of stocks.

Valuations also tell an important story. Despite strong price performance, technology valuations today are actually lower on a price-to-earnings basis than they were at the start of 2025. Earnings growth has largely kept pace with share price gains, meaning returns have been supported by improving fundamentals rather than expanding multiples.

AI remains a powerful long-term theme, but what 2025 demonstrated was a shift away from narrow concentration and toward a more balanced, fundamentally driven market environment.

Investment Philosophy and Risk Management

Another common question centered on our broader investment philosophy and how portfolios are positioned to manage risk, particularly during periods of uncertainty.

Once again, 2025 provided a real-world case study in the value of diversification—especially global diversification. Both developed international and emerging market equities outperformed U.S. markets, reinforcing why we avoid concentrating portfolios too heavily in any single region.

Fixed income also played a critical role throughout the year. During periods of heightened volatility—including the market reaction around Liberation Day—bonds provided stability and ballast.

We also saw meaningful diversification benefits from commodities, particularly gold. Gold has shown staying power, supported in part by structural changes such as central banks increasing reserve allocations following regulatory shifts. These dynamics have strengthened gold’s role as a strategic portfolio diversifier rather than merely a tactical or short-term trade.

What 2025 Reinforced

Taken together, the experience of 2025 reinforced why we remain focused on diversification, fundamentals, and disciplined risk management. Markets will always experience periods of uncertainty, concentration, and volatility. A well-constructed portfolio is designed to weather those moments while staying aligned with long-term goals.

We truly appreciate the thoughtful questions and engagement we continue to receive, and we are always happy to continue the conversation.