Manning & Napier (MN) investor relations material

Key market contradictions and drivers

• 2025 saw strong headline economic and market performance, but underlying growth was narrow and AI-driven, with most S&P 500 returns concentrated in AI-linked companies.

• Consumer sentiment hit all-time lows despite the market reaching record highs, highlighting a disconnect between Main Street and Wall Street.

• Inflation moderated but remained above the Fed's 2% target, with demand-driven inflation still high, raising questions about continued rate cuts.

• Market valuations are highly dispersed, with both very high and very low multiples, creating opportunities for active management.

AI, speculation, and market breadth

• AI-related stocks have dominated returns, leading to a narrow market and speculative investment behavior, reminiscent of the late 1990s tech bubble.

• There are signs of over-investment and questionable business models in AI, but also real productivity gains and valuable use cases.

• The market is in a narrative-driven phase, with value sectors like energy, financials, and healthcare out of favor but likely to benefit from AI in the long run.

• ETF launches have surged, with many being leveraged, structured, or crypto-related, reflecting increased risk appetite.

International equities and regime shift

• Non-U.S. equities outperformed U.S. equities in 2025, but opinions are split on whether a regime shift is underway.

• International stocks are at significant valuation discounts to U.S. stocks, with Europe trading at much lower earnings multiples.

• Improving growth rates, geopolitical changes, and a weaker dollar support the case for international equities.

• International small-cap stocks offer greater inefficiencies and opportunities for active managers.