Broadcom is one of the largest semiconductor companies in the world and has also expanded into infrastructure software. Its semiconductors primarily serve computing and networking, with custom AI accelerators now accounting for the bulk of the business. It is primarily a fabless designer, but holds some manufacturing in-house, such as for its best-of-breed film bulk acoustic resonator filters that sell into the Apple iPhone. In software, it sells virtualization, infrastructure, and security software to large enterprises, financial institutions, and governments. Broadcom is the product of consolidation. Its businesses are an amalgamation of former companies like legacy Broadcom and Avago Technologies in chips, as well as VMware, Brocade, CA Technologies, and Symantec in software.

Broadcom is one of the largest semiconductor companies in the world and has also expanded into infrastructure software. Its semiconductors primarily serve computing and networking, with custom AI accelerators now accounting for the bulk of the business. It is primarily a fabless designer, but holds some manufacturing in-house, such as for its best-of-breed film bulk acoustic resonator filters that sell into the Apple iPhone. In software, it sells virtualization, infrastructure, and security software to large enterprises, financial institutions, and governments. Broadcom is the product of consolidation. Its businesses are an amalgamation of former companies like legacy Broadcom and Avago Technologies in chips, as well as VMware, Brocade, CA Technologies, and Symantec in software.

The current bull market, which begins today with the S&P 500 at 7,473, started in October 12, 2022 and is now more than 3.5 years old. In that time, the S&P 500 has risen more than 110%, having endured high inflation, a credit rating downgrade of the U.S. Treasury, a hard-fought political election, the onset of tariffs and trade wars, a government shutdown, and now a war. Stocks have been supported by an economy that continues to grow, inflation and interest rates that had been heading lower, and robust profitability from S&P 500 companies. How much farther can this bull market go? We studied the 13 other bull markets that have occurred since the end of World War II. On average, the S&P 500 gained 164% during these periods, which averaged 57 months in duration, or just about five years. So the current rally is approaching average thresholds. But we also note that the recent bull markets have generated higher returns over longer periods of time, as economic growth has been more consistent and inflation generally has been tame. On average, the five bull markets since 1980 have seen stocks advance about 240% over a period of almost six years. And the bull market prior to the pandemic carried on for 11 years, during which stocks rose 500%. So while we are not in the early innings of the ball game, there is no reason to think that this is the bottom of the ninth. It is worth pointing out, though, that the 2009-2020 bull market began with stocks deeply depressed on valuation, whereas stocks are already near fair value in the current market environment. Further, the second year of the four-year presidential cycle consistently has delivered the weakest equity-market performance. We remain optimistic that stocks can post gains in 2026, but our base case outlook calls for single-digit returns, not the 15%-25% returns investors have enjoyed for the past three years.

Global economic growth is expected to dip in 2026 due to the Middle East conflict, but then pick up slightly in 2027, according to the latest World Economic Outlook from the International Monetary Fund. By the numbers, the world economy is expected to expand at a 3.1% rate in 2026, down from the 3.4% rate in 2025 and from the prior, pre-war forecast for 3.3% growth. For 2027, global growth is forecast at 3.2%. How does this compare to historical rates? Current rates are lower than the long-term historical global growth rate of 3.8%, due to the impact in recent years of tariffs and trade wars, onshoring, inflation, and higher interest rates. But that's not to say that there aren't growth opportunities for investors around the world. For advanced economies, growth is forecast at 1.8% in 2026. This forecast has been steady in recent months, as tariffs have not had the expected bite. Among the advanced regions, the U.S. economy is expected to grow the fastest this year, at a 2.3% rate, while Europe's forecast is for 1.1% growth and Japan is estimated at 0.7%. For emerging economies, forecasts call for 3.9% growth in 2026. The clear leaders are expected to be India and China, with average growth for the next two years of 6.5% and 4.2%, respectively. These nations have different drivers: population growth in India, which points toward commodity and industrial-based infrastructure-related products; and productivity growth in China, which suggests spending on healthcare, technology, and financial services as GDP/capita grows. Recent financial market activity reflects the bullish outlook for emerging market economic growth. The Emerging Market Index ETF EEM is up more than 50% over the past year, outpacing the S&P 500 for one of the few times in the past decade.