March CRU: Why Investors Are Looking at Different Assets

To borrow from Shakespeare, “now is the spring of our discontent …”  Another spring, another global crisis with three characteristics that make it particularly challenging for investment decision-making.  The “reciprocal” tariff program was, and the conflict with Iran is (1) self-inflicted, and could theoretically end at any arbitrary moment; (2) leading to true economic catastrophe if sustained; and (3) driven by unclear, conflicting objectives, making it difficult to assess the likely outcomes.

So far, investors are responding as if they learned a lesson last April – Trump doesn’t want serious conflict, so the conflict is unlikely to be prolonged.  But it’s starting to feel like the situation is not in hand – unlike the tariffs, the Iran conflict can’t be turned off with just a press release.

With nearly all the S&P 500 now reported, we now know that there’s good news and not-so-good news regarding Q4 earnings. The good news is that Q4 earnings look to have grown 13% year-over-year (vs. an expectation of 7% at the start of earnings season), earnings grew a robust 10% for the median S&P 500 company, and analyst revisions to 2026 earnings expectations have been positive (expectations for the coming year have historically been revised down in Q4).

The not-so-good news is that reported and expected (future) earnings growth are highly concentrated. Seven artificial intelligence-exposed stocks (Amazon, Broadcom, Google-parent Alphabet, Facebook-parent Meta, Microsoft, Micron, Nvidia) collectively grew earnings by 32% in 2025, accounting for half of S&P 500 EPS growth. The median S&P 500 company grew earnings by a healthy +9%. Consensus estimates suggest Nvidia alone will account for 24% of S&P 500 EPS growth in 2026.

The outsized profit expected for AI enablers is particularly interesting given the dominant market theme has been stock price declines of companies seen to be disrupted by AI, particularly in the software industry. 

After decades of preferring high growth digital companies, investors are increasingly favoring companies built on hard-to-replicate physical assets – capacity, networks, resources, and infrastructure — where technological obsolescence is limited. 

Examples include transmission grids, pipelines, utilities, transport infrastructure, critical equipment, and categories of industrial capacity where replacement cycles are slow relative to digital innovation.

Ever handy with an acronym, Goldman Sachs has suggested HALO – Heavy Assets, Low Obsolescence – to refer to the new darlings of Wall Street.  We’ll get to know them much better over the coming months.

Disclaimer: The information provided is for educational purposes only and is not intended as investment advice. Past performance does not guarantee future results. Investors should consult with a qualified financial professional before making any investment decisions.