Imagine — a boat with two hulls. Preposterous! Oh, wait. Catamarans.

Vanguard, the world’s largest nautically themed asset manager, just separated into two investment units. The company’s funds are now handled by either Vanguard Capital Management or Vanguard Portfolio Management, which are separate teams operating in different buildings. The division, completed this week, came about six months after Vanguard announced the pending establishment of the two US investment advisors, a process that it said was years in the making.

“Vanguard has grown enormously, and splitting responsibilities creates clearer lines of accountability, more leadership roles and additional career paths for portfolio managers,” Jeff DeMaso, editor of The Independent Vanguard Adviser, said in a note to clients about the change. “But it also introduces a real challenge: Can Vanguard maintain two world-class stock indexing teams without letting costs rise or performance slip?”

Making Waves

Two distinct investment management and stewardship teams is good news for clients and the firm, according to Vanguard. “Establishing separate investment management teams also creates a number of benefits for our investors and our organization, including management teams with an even deeper focus, investment teams with greater flexibility, and highly talented crew with more opportunities for growth,” the company said in an announcement. “Additionally, the funds will benefit from streamlined operations for these high-performing teams.”

But it also alluded to a change affecting something that conservative groups and politicians have made a target of for several years: proxy voting. Vanguard, along with BlackRock, StateStreet and proxy advisory firms, have been criticized by Republican members of Congress over their alleged influence on corporate policies at the companies in their portfolios, particularly around environmental, social and governance issues. Having two investment stewardship teams will help “further diversify perspectives in the proxy voting ecosystem over time,” Vanguard stated.

Here’s how the two separate investment management teams break down:

• Vanguard Portfolio Management runs $2.7 trillion, DeMaso noted, among all actively managed stock funds (except diversified equity strategies), index funds (sector, style-box and dividend) and actively managed multi-asset funds.
• Vanguard Capital Management runs $8.2 trillion across all bond funds, active diversified equity, broad-market and foreign index funds and passive multi-asset funds such as the target-date suites.

Rocking the Boat: A nuance to the creation of two different teams is that there could possibly be tension, as some of the funds hold a lot of the same stocks, and the funds may compete for buying shares or could be on different sides of a trade, DeMaso said. “What happens if one team becomes faster, more efficient or simply better at trading than the other?” he said. “If Vanguard executes well, shareholders shouldn’t notice a thing. But the task is not trivial: Vanguard now has to run two elite indexing operations while preserving its defining advantage — rock-bottom costs.”

USA! USA! USA!

No, that’s not the raucous chanting of World Cup fans (just wait until June), it’s Goldman Sachs’ outlook for 2026. Concerns from a top-heavy stock market to the White House’s supposed threat to the Federal Reserve’s independence and foreign equities outpacing domestic returns are relatively insignificant to America’s continued dominance, the Wall Street stalwart says.

“People are underestimating US resilience,” said Goldman CIO Sharmin Mossavar-Rahmani. “In spite of all the headlines that you read about — is America on the decline, etc. — we want to make a very strong stand and say no, that is not the case.”

For plenty of advisors and their allocation, that might just mean continuing what you were doing last year. “Portfolios should be significantly overweight in US assets,” Mossavar-Rahmani said at a press event last week.

Independence Day

Political risk is a frequent concern. President Trump has been vocal about wanting lower inflation and interest rates and has suggested firing Fed Chair Jerome Powell if it would help achieve that goal. And on Sunday, Powell said that the Department of Justice began investigating him over testimony he gave to Congress last summer regarding the central bank’s building renovation, which he argues is really an attempt to weaken Fed independence.

While the rhetoric is aggressive and certain actions could increase short-term volatility, Goldman views the pressure as familiar rather than alarming. “The fact that presidents want lower rates is not that unusual,” Mossavar-Rahmani said, adding that Goldman does not believe the White House poses a threat to monetary policy independence. Last year, Trump attempted to fire a member of the Federal Trade Commission and a Federal Reserve governor. Lawyers, whomGoldman consulted, expect the Supreme Court to side with Trump in the FTC case, but not in the Fed matter, underscoring the central bank’s unique independence.

Proof Is in the Earnings

Goldman’s portfolio guidance comes even as some investors look overseas for opportunity. International equities jumped 32% last year, while US stocks gained a still-impressive but lower 18%, according to Goldman data. But returns alone don’t tell the full story:

• Earnings growth in non-US developed markets rose just 1%, compared with 12% in the US. In China, earnings declined despite equity returns climbing 31%.
• The S&P 500 is concentrated, with the 10 largest companies accounting for 41% of the index. Still, those firms boast median profit margins of 29%.

“If you don’t have the earnings to support any market move, it’s not going to last,” Mossavar-Rahmani said.

USA, A-OK. Geopolitical risks — from Ukraine and the Middle East to India-Pakistan tensions — remain a wildcard. Goldman isn’t too concerned, though, said Brett Nelson, head of tactical asset allocation at Goldman. “We do think they could be sources of volatility, but we’re only putting 25% odds on the risk of them being disruptive enough to actually result in a recession in the US.”

Small business is thinking big.

In a survey published Tuesday, the National Federation of Independent Business (NFIB) said its small-business optimism index jumped in December to 99.5, up from 99 the month before and above its long-term average of 98. So what’s got Main Street feeling so rosy all of a sudden?

Small Business, Big Dreams

Well, lots of reasons, as it turns out. For one thing, the rise in optimism is inversely correlated to a decrease in uncertainty, which spiked through last spring and summer amid the White House’s tariff tussles. Speaking of: The US Supreme Court could rule as soon as today on the legality of the president’s tariffs-via-emergency-order play. Either outcome would only provide more certainty moving forward, though a blow against the tariff regime would likely be welcome for small business owners who cited taxes and inflation as their first and third most important issues.

Their second-most cited issue moving forward? Finding quality labor — and it’s here where the NFIB typically provides its most useful indicator:

• 19% of respondents said finding quality labor was the biggest challenge they faced, just a point behind “taxes.” Meanwhile, 33% of respondents said they had job openings in December that they were unable to fill, with nearly half of owners saying they found few or no qualified candidates for open positions.
• The unfilled job openings rate remains well above the historical average of 24%, though it has improved somewhat in the past year. The NFIB survey is typically an accurate predictor of the US Bureau of Labor Statistics’ monthly non-farm payroll jobs report.

If Any Indication: Also well above historical norms? You guessed it: selling prices. A net of 30% of owners said they increased selling prices in December. That’s down from 34% in November, but above the historical average of 13%. The inflation indicator was mirrored in the Consumer Price Index report also released Tuesday by the US Bureau of Labor Statistics. In December, the CPI rose to 2.7%, while the core CPI, which excludes food and energy costs, rose 2.6%. The bottom line? “In the near term, inflation will run hotter than policy makers would like, so we expect the Fed to pause this month and possibly in March … For now, the balance of risks tilts toward the weakening labor market,” Jeffrey Roach, chief economist for LPL Financial, told The Daily Upside.