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CLA OUTLOOK

Key Insights for Sound Financial Strategies

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FEBRUARY 9 WEEKLY INSIGHTS
Software stocks may be the first casualty of the AI revolution
  • SaaS providers have declined roughly 30% since late October, as AI-driven change is disrupting their traditional growth trajectories. 
  • Software stocks have historically commanded high price-to-earnings multiples on the back of strong earnings growth, but markets are increasingly pricing in a more challenging outlook. 
  • The AI arms race has pushed hyperscalers — particularly the Magnificent Seven — to commit billions in capital expenditures. 
  • Mag 7 performance has moderated as investors reassess the return on this spending, with only two members outperforming the S&P 500 in 2025. 
  • CLA maintains a quality-oriented tilt, favoring companies with high return on equity while selectively embracing small-cap exposure where valuations are more attractive  . (Source: CLA Outlook)
Portfolios benefit from the addition of bonds given their correlation to stocks
  • The negative correlation between stocks and bonds enhances bonds as a valuable diversifier within investment portfolios.
  • Despite renewed attention on gold and other metals, it’s important to remember strategic allocations to hard assets should remain below 2% of total portfolio weight. 
  • Traditional fixed income should continue to serve as the core diversifying asset, with allocations ranging from roughly 20% for growth-oriented investors to as much as 80% for income-focused portfolios.
  • Given the overall allocation of bonds in a portfolio, consider treasury, corporate, mortgage, and municipal bonds for the tax treatment.
  • CLA strategy currently puts an emphasis on mortgage bonds and corporates while treasuries have underperformed year-to-date. (Source: CLA Outlook, Morningstar)
A Roth conversion strategy takes advantage of current tax rates
  • A Roth conversion involves moving assets from a traditional IRA or other pre-tax retirement account into a Roth IRA, paying income tax today in exchange for future tax-free growth and withdrawals. 
  • The strategy is often used to mitigate future tax risk, reduce required minimum distributions (RMDs), and gain greater control over timing of retirement income. 
  • Roth conversions can be an effective wealth planning strategy when completed over multiple years or during periods of lower income to limit the tax impact.
  • Consult your tax and wealth team to learn if this strategy is appropriate for you. (Source: CLA Wealth Advisors)
Develop strong financial strategies
Tune in to the CLA Outlook for 2026 as we discuss timely topics around policy, the economy, and market performance.
Read the CLA Outlook
Strategic Opportunities
The Big Picture for 2026
The CLA Outlook signals a turning point: stabilized inflation, growth above trend, and easing interest rates. Explore the key forces influencing portfolios in the year ahead.
  • Economic outlook
    Growth is back on the horizon after three years of higher interest rates and restrictive Federal Reserve policies, with AI helping to transform industries.
  • Fiscal policy
    The rising U.S. deficit remains a key concern as government spending continues to outpace revenues — watch for this to be a focal point heading into midterm elections.
  • Fixed income outlook
    Lower interest rates should be a tailwind to bonds in 2026, though consider credit quality and duration when building high-quality income portfolios.
  • Equity outlook
    Despite elevated stock valuations, led by tech-dominant Magnificent-7 stocks, equities remain compelling because of strong earnings growth and a robust economic backdrop.
  • Alternatives outlook
    Lower interest rates favor private equity and private real estate, while private credit can warrant caution. Manager selection and due diligence remain critical.
  • We can help
    No matter your financial position, incorporating sound tax and wealth advisory could help you achieve more.
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