Volatility is masking the best stock-picking environment in years

The headlines in 2026 have been relentless. Tariffs, geopolitics and an unresolved debate about artificial intelligence have produced an environment where top-down volatility dominates portfolio conversations and investment decisions are increasingly shaped by noise rather than fundamentals.

Michael Mark, client portfolio manager, equities at PineBridge Investments, has a counterintuitive message for the market: the noise is real. But underneath it sits the best stock-picking environment advisers have seen in years, and most portfolios are not positioned to take advantage of it.

For advisers thinking about active international equities, that gap between perception and opportunity is exactly where the conversation needs to start.

“What is a challenge is also an opportunity. An opportunity to add names to your portfolio that have been oversold. An opportunity to sell and realise profits of those that have done quite well.”

The earnings foundation to build on

The starting point is corporate earnings, and here the picture is considerably stronger than many client conversations would suggest.

“All that top-down news driven volatility only masks all the good things that are happening underneath,” he says.

With the S&P 500 approximately 90 per cent through first quarter results, the earnings beat rate is tracking at 27.7 per cent year on year. “That would be the highest rate since 2021,” he says. “Not bad.”

More importantly for portfolio construction, correlations between stocks have normalised significantly. In a high-correlation environment, even excellent stock selection struggles to show through.

When correlations fall, selectivity becomes a genuine source of return rather than a theoretical one. “Correlations among stocks, how they move together, is a lot more reasonable today than in years past,” Mark says. “Which presents those who are selective in their investments an opportunity to actually drive returns.”

For advisers evaluating active international equity managers, this is a meaningful shift in the backdrop. The conditions that made passive exposure the path of least resistance are changing.

The technology valuation argument

Technology valuations generate more client anxiety than almost any other topic in international equities right now. The Magnificent Seven represent around 20 per cent of the MSCI All Country World Index, and concentration at that level makes many advisers uncomfortable.

But Mark’s analysis is more nuanced than the headlines allow. Technology, on a price-to-earnings basis, is currently sitting in the middle of its historical interquartile range.

Earnings growth has outpaced price movement, meaning the sector has grown into its valuation rather than away from it. “Earnings growth continues to be very, very strong and is in fact outpacing price movement,” he says, “so that the denominator moving higher than the numerator, resulting in a lot more reasonable valuations.”

He also makes a point that deserves more attention in portfolio construction conversations.

“What about the other 80 per cent?” he asks. “Because 97 per cent is only represented across three sectors. But surely there are certainly beneficiaries outside of just technology, communication services and some consumer discretionary names.”

The industrial opportunity most portfolios are missing

Beyond technology, Mark identifies industrials as the sector where the most compelling and least appreciated opportunities are concentrated.

His example is a large freight trucking brokerage, which invested a billion dollars integrating AI into its operations and has since reported productivity per person per day is up 40 per cent. “Imagine being 40 per cent more efficient in your day,” he says. “Truly game changing.”

That kind of AI-driven efficiency gain, playing out inside an industrial business rather than a technology one, is precisely what bottom-up managers are identifying while top-down positioning remains anchored to the obvious AI names.

The practical case for active international equities

Just over 40 per cent of stocks in the MSCI All Country World Index outperformed the benchmark over the period Mark examined.

“In other words, there are no shortage of opportunities despite this fear of market concentration, if you’re bottom-up,” he says.

Concentration at the index level does not mean concentration of opportunity. It means opportunity is being missed by those who allow macro anxiety to drive allocation decisions that should be driven by fundamentals.

The advisers who build their active international equities exposure around bottom-up selectivity now, rather than waiting for the macro picture to clear, are the ones most likely to look back on 2026 as the year the real work got done.