Artificial intelligence ('AI') enthusiasm continued to push US markets higher, despite the ongoing conflict in Iran. Strong results from companies such as Dell and Advanced Micro Devices boosted the tech sector, resulting in a +8.4% increase in the NASDAQ. Despite not experiencing the same sharp rise, the S&P 500 rose +5.2%. Similar to the prior month, US markets outpaced their international peers, with the Euro Stoxx 50 and FTSE 100 rising +2.9% and +0.3% during the month, respectively.

Domestic markets continued to grind higher, with the ASX All Ordinaries Accumulation Index rising +1.2%. Miners led the way (+10.4%), whilst the Consumer Discretionary sector also outperformed (+6.3%), as investors reduced the chance of further RBA rate hikes following the release of softer economic data. From a negative standpoint, CSL's fall from grace continued (-22%) after another earnings downgrade.

In bond markets, the US 10-year bond yield rose +7 basis points (bp) to 4.44%, whilst its Australian counterpart fell - 23bp to 4.8%. The Australian dollar fell marginally during the month to US$0.72, implying a decrease of 0.1 cents.

A new data product launched recently by CNBC and wealth technology platform Addepar offers something genuinely useful: a quarterly window into how family offices (some of the most sophisticated pools of private capital in the world) are actually allocating their money.

The inaugural reading is instructive, and not entirely for the reasons its authors intended.

According to the tracker, equities now account for 34% of family office portfolios, up from 32% a year ago. This makes equities the largest and fastest-growing asset class in the cohort. Public stocks, the report notes, were one of the only categories to grow as a share of portfolios over the past year. Eighty per cent of those equity holdings sit in domestic US stocks.

That is a lot of conviction in a single asset class. And when an asset class commands that kind of weight in the portfolios of the most well-resourced investors in the world, it is worth pausing to ask a simple question: what does the price of that asset actually reflect?

What the Numbers Say

The Shiller CAPE ratio is the cyclically adjusted price-to-earnings ratio that smooths earnings across a full business cycle to filter out short-term distortions.

• It currently sits at approximately 40.7.
• The long-run median is 16.
• The long-run average is closer to 17.

To put 40.7 in context: this is only the second time in the 155-year recorded history of the metric that US equities have traded above the 40 threshold. The first was the peak of the dot-com bubble in late 1999 and early 2000. History does not repeat, but the company the current reading keeps is worth noting.

The Buffett Indicator is the total US stock market capitalisation expressed as a percentage of GDP, which Warren Buffett himself described as "probably the best single measure of where valuations stand at any given moment".

• It currently sits at approximately 220-240%, depending on the precise measure used.
• That places it approximately two standard deviations above its long-run trend, firmly in territory that Buffett described in 2001 as "playing with fire." 

Based on current levels, some models project the US equity market to deliver negative real returns over the next eight years. These are not fringe indicators. They are among the most widely respected tools in long-run valuation analysis. And right now, they are aligned in pointing in the same direction.

The "This Time is Different" Argument Deserves a Hearing

The most intelligent counter-argument to any valuation-based concern is the structural one: that the composition of the market has changed so fundamentally that historical averages are no longer the right benchmark.

It goes something like this. The S&P 500 today is dominated by a handful of companies including Microsoft, Nvidia, Apple, Alphabet and Meta that are not merely large but potentially transformative. Artificial intelligence, the argument runs, represents a genuine productivity step-change: the kind that compresses costs, expands margins, and accelerates earnings growth across the economy in ways that prior cycles simply did not.

If AI delivers on even a fraction of its projected economic impact, the earnings denominator in every valuation ratio is going to look very different in five years. On that view, a CAPE of 40 may not be irrational but simply forward-looking in a way that backward-averaging cannot capture.

This argument is not frivolous. There are serious economists and investors who make it carefully, and it deserves to be engaged rather than dismissed. But there are three problems with anchoring a 34% equity allocation to it:

• The Track Record of Structural Arguments: The first is that "this time is different" has a reliable track record of being wrong at precisely the moments it feels most convincing. In 1999, the internet was also real, also transformative, and also going to change everything. It did. It just didn't justify the valuations attached to it at the time. Structural change and stretched valuations are not mutually exclusive, and the latter has historically resolved itself regardless of the former.
• Timing and Distribution: The second problem is one of timing and distribution. Even if AI does deliver a step-change in corporate earnings, the market has to some extent already priced that expectation in. The question is whether current equity prices already reflect the optimistic scenario, leaving little margin for error if delivery is slower, more uneven, or more competitively distributed than the consensus assumes.
• Concentration Risk: The third is concentration risk. The AI thesis is not a broad equity thesis, but a thesis about a small number of companies. A portfolio with 34% in public equities, 80% of that in US stocks, is substantially a bet on a narrow slice of the index that carries the AI premium. That is a very specific wager dressed up as asset class diversification.

The honest position is this: AI may well be structurally significant enough to justify higher-than-historical valuations.

But "higher than historical" is not the same as "as high as they currently are," and it is not a framework that removes the need to ask what happens if the thesis takes longer, costs more, or distributes differently than expected.

The Problem with Consensus

There is an important distinction between a decision that looks correct and a decision that is correct. When the world's most sophisticated investors are adding to equities at exactly the moment those equities are trading at historically extreme valuations, the two things can diverge significantly.

This is not a criticism of family offices. The past several years have rewarded equity concentration generously, and the behavioural pull of recent performance is well-documented. Professor Ulrike Malmendier's research on what she calls the "experience effect" demonstrates that investors systematically overweight the market conditions they have personally lived through.

A decade of strong equity returns leaves a mark. It shapes expectations, calibrates assumptions, and makes elevated allocations to equities feel entirely reasonable. Until it doesn't.

The CNBC/Addepar data shows equities growing as a share of family office portfolios at the same time that every major long-run valuation metric is flashing caution. That is not a coincidence. It is precisely what the experience effect predicts.

What Diversification is Actually Supposed to Do

The case for trend following as a complement to equity-heavy portfolios is rarely more relevant than it is in a high-valuation environment. Trend following does not require a view on whether equities will correct, or when. What it does is participate in sustained price moves - in any direction, across any asset class - without requiring the market to go up.

In environments where equities are priced for near-perfection and deliver something less than that, trend following has historically provided what researchers call crisis alpha: genuine uncorrelated returns precisely when conventional portfolios need them most.

There is a further point worth making, and it is one that often surprises people. Trend following does not require equities to fall in order to perform. If the AI thesis is correct and US equities continue their ascent, a trend-following strategy will participate in that move. It is, by design, long whatever is going up.

The irony is that trend following can trade a bubble just as effectively as it can trade a correction. It does not need to predict which one is coming. What it needs is for prices to move in a sustained direction (and markets at extreme valuations tend to be nothing if not directional) on the way up and, eventually, on the way down. The exit from a trend is governed by the same rules as the entry: no heroics, no forecasting, no requirement to be right about the macro.

The ECCM Systematic Trend Fund trades across more than 90 global futures markets - commodities, fixed income, currencies, equity indices - allowing it to capture trends wherever they emerge. In Q1 2026, that meant energy markets, where sustained directional moves provided meaningful returns while equity-heavy portfolios struggled.

The point is not that this will always happen. The point is that the opportunity set is genuinely broader than a portfolio concentrated in US public equities. The efficient frontier - the concept that the best risk-adjusted portfolio is not necessarily the highest-returning one, but the one that combines assets most efficiently - is often invoked in theory and ignored in practice. The Addepar data suggests that family offices, for all their sophistication, are no exception.

A Note on Expectations

None of this is a prediction. Elevated valuations can persist for longer than any rational model suggests they should. The CAPE ratio was above 30 for years before the dot-com correction. Markets can stay expensive.

But there is a difference between accepting that markets can remain expensive and deciding that 34% of a portfolio in expensive equities (and concentrated 80% in a single country) is the appropriate response to the current opportunity set.

At current valuations, US equities are being asked to do a lot of heavy lifting in portfolios that may have limited room to absorb disappointment. The question sophisticated investors should be asking is not whether equities belong in a portfolio. They do.

The question is what work those equities are being expected to do, and what happens to the portfolio if that work doesn't get done. Genuine diversification - across return types, not just asset labels - exists precisely for that scenario.

Wholesale clients can find more information on ECCM and the ECCM Systematic Trend Fund at Australian Fund Monitors and ECCM's website.

Frontier market bonds are moving out of the margins of portfolios and into sharper focus. As emerging market debt has matured, investors are looking further down the development curve - towards economies offering higher yield and return potential, driven less by global macro and more by idiosyncratic country fundamentals.

That last point matters. Over the past decade, frontier market bonds have shown a correlation of just 0.03 to US Treasuries, highlighting how differentiated this segment can be [1]. In an environment where diversification is harder to achieve, that kind of independence is rare and valuable.

But this is not just a diversification story. Frontier markets themselves are changing - structurally, economically and financially - in ways that are reshaping the investment case.

Opening the gates

Frontier economies have historically been defined by limited market access and reliance on official financing. That is changing. Over time, issuance of Eurobonds bonds has increased, policy frameworks have improved, and foreign investor participation has broadened.

Recent activity underlines the shift. In March 2026, the Democratic Republic of Congo came to market with six- and 11-year bonds that were around four times oversubscribed, signalling strong demand even in less established markets. Elsewhere, repeat issuance from countries such as Kenya, Nigeria, Ghana and Zambia is reinforcing the depth of the opportunity.

Local currency markets are also growing rapidly. Following the pandemic, several countries have liberalised foreign exchange regimes, tightened monetary policy and undertaken fiscal consolidation, attracting renewed portfolio inflows. Markets such as Nigeria, Egypt and Kazakhstan are increasingly accessible and relevant to global investors.

The engines of expansion

Beyond capital markets, frontier economies are benefiting from powerful long-term trends.

Demographics is one. Over the next two decades, hundreds of millions of people will join the workforce across frontier markets, supporting consumption, investment and productivity growth. This so-called 'demographic dividend' remains largely untapped.

Technology is another. In 2010, there were just 13 million mobile money accounts globally. By 2024, that figure had reached nearly 800 million, with much of the growth concentrated in Sub-Saharan Africa [2]. Financial inclusion is improving quickly, bringing more people into the formal economy and accelerating development.

Natural resources also play a critical role. Frontier markets account for a meaningful share of global production in several key commodities. Gabon produces almost a quarter of global manganese output, Morocco around one eighth of phosphate rock, and Nigeria and Rwanda together supply more than a third of tantalum - all essential inputs for batteries, fertilisers and digital technologies.

At the same time, efforts by developed and emerging economies to diversify energy sources are supporting the trade balances of many frontier countries, strengthening external positions and improving resilience.

Returns that behave differently

For investors, these structural shifts are translating into a distinctive return profile. Frontier market sovereign bonds have delivered annualised returns of 8.22% over the past decade, broadly comparable to emerging market equities, but with significantly lower volatility [3].

This combination reflects the idiosyncratic nature of frontier markets. Returns are often driven less by global macro conditions and more by country-specific developments such as policy reforms, commodity dynamics or political shifts.

That can create both opportunity and mispricing. Countries undergoing reform or recovery can reprice quickly, while others facing stress may offer attractive entry points for investors with the expertise to assess long-term value.

Recent market behaviour illustrates this dynamic. Following the 'Liberation Day' sell-off in 2025, frontier bonds rebounded sharply and went on to deliver close to 20% total returns over 2025 [4].

Risks remain - but so does progress

None of this is to underplay the risks. Frontier markets still face challenges around liquidity, currency volatility and governance. Over the past six years, 10 countries have defaulted on external debt, reminding investors of the potential for stress.

Liquidity, in particular, remains a defining feature. Frontier markets are generally thinner and less actively traded than their emerging market counterparts, leading to wider spreads and sharper price movements during periods of volatility.

However, the direction of travel is improving. Policy credibility has strengthened in many countries, and responses to shocks are becoming more orthodox. Post the outbreak of the conflict in Iran, Egypt's decision to allow currency depreciation as a shock absorber, rather than exhaust reserves, is one example of a more disciplined approach.

At the same time, fiscal and debt metrics are improving in several markets. Angola provides a clear case: its debt-to-GDP ratio has fallen sharply from pandemic-era highs of around 120% to roughly 50% in recent years, supported by higher oil prices and policy reform [5].

Final thoughts...

Frontier market debt remains a specialist area, and it is not suitable for every investor. But as market access improves, local currency markets deepen and global diversification becomes more challenging, its relevance is growing.

For those able to navigate the complexity, the opportunity is clear: a segment of the fixed income universe that offers genuinely differentiated returns, exposure to structural growth, and a set of risks that are - increasingly - better understood and better managed.

That combination is what makes frontier market bonds less of a curiosity, and more of a natural next chapter for investors navigating a changing fixed income landscape.

[1] Source: Bloomberg, 31 December 2025. 

[2] Source: World Bank, February 2026.

[3] Source: J.P. Morgan, January 2026.

[4] Aberdeen Investments, December 2025.

[5] Aberdeen Investments/IMF, 2026.

April was a slower month for Australian property values, posting a national rise of 0.3%, the lowest monthly growth rate since January 2025. 

Once again, Perth (+2.1%) led the way with a fourth consecutive monthly rise of greater than 2%, with its annual increase now reaching 26%. Likewise, Brisbane (+1.2%) and Adelaide (+1.1%) continued to add value, again posting monthly increases of greater than 1%. 

However, values in Melbourne and Sydney (both -0.6%) declined for a third straight month.

Additionally, estimates of capital city home sales over the past three months were down 5.4% compared to last year and 7.4% below the previous five-year average, indicating a slowdown in buyer demand. Regional areas have been more resilient in the face of this, with values increasing by 4.2% over the first four months of the year, compared to 1.8% for the capital cities. 

April Edition