As shown in the chart above, in 2010, the ten largest S&P 500 companies represented 19% of the index and offered an average dividend yield of nearly 3%. By 2025, the top 10 accounted for roughly 40% of total market value – double the historical average and more concentrated than the peak of the TMT bubble (the technology, media, and telecommunications bubble) in 2000 – while the average dividend yield has fallen to just 0.44%.3 This shift highlights a market that delivers more growth potential but far less income and diversification.
Historically, periods of concentrated leadership and heavy capex investment have been followed by phases of higher volatility and mean reversion.4 We believe 2026 may fit that pattern – not as a downturn, but as a transition to a more volatile, less one-directional market. In this environment, our yield centric portfolio construction may help smooth the income stream rather than chase the highest total return.
We believe dividend-growth and quality-income equities remain well supported by fundamentals, and we continue to hold meaningful allocations to these segments across our portfolios. This includes exposure to U.S. large-cap dividend payers with strong balance sheets and stable free-cash-flow generation, as well as systematic strategies that tilt toward profitability, yield, and quality factors. These positions can offer the potential for steady distributions while helping cushion portfolios during periods of heightened rate or policy uncertainty.
We also maintain targeted allocations to healthcare, global infrastructure, and select emerging market (“EM”) equities. Healthcare can offer defensive earnings and attractive dividend growth potential while infrastructure can provide stable, inflation-linked cash flows. Meanwhile, emerging markets can provide differentiated sources of income and attractive relative valuations. Together these exposures diversify the equity income stream and reduce reliance on the narrow group of mega-cap technology names that have dominated index performance.
Ultimately, we think well-balanced income portfolios can strengthen the stability of the income retirees depend on and help mitigate short-term market swings.
3. Positioning for income over price appreciation
Spreads across most credit asset classes remain quite tight, but well supported by a resilient economy, healthy corporate balance sheets, and relatively low defaults. Thus, we believe 2026 is shaping up to be another year where returns may be driven primarily by income, or carry, rather than price appreciation. Our focus remains on working hard to build portfolios that capture reliable yield while maintaining quality, flexibility, and diversification. We favor sectors that balance attractive carry with lower interest rate sensitivity.
Three areas stand out for income investors today:
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