With 2025 nearing a close, today's piece reviews the changes that transpired through the year within NDW's DALI Tool.
With 2025 nearing a close quarterly and year-end reports are soon to follow as investors look toward 2026. Among the many tools that will be covered in the coming weeks, today’s piece will focus on NDW’s Dynamic Asset Level Investing (DALI) Tool. As a brief reminder, the tool utilizes relative strength to rank asset and sub-asset classes in order to identify leadership among and within asset classes. This allows investors to adapt to market trends and tactically outweigh those asset and sub-asset classes showing leadership, while avoiding laggard trends that can drag on a portfolio.
For all of 2025, DALI favored offensive asset classes with domestic and international equities maintaining the top two positions for much of the year with commodities adding to the offensive tilt of the tool. While domestic equities maintained the top spot for most of 2025, action in Q1 and Q2 brought the three offensive asset classes to a jockeying position with commodities and international equities each spending time as the top ranked asset class during Q2. Defensive asset classes like cash, currencies, and fixed income maintained their rankings in the fourth, fifth, and sixth positions all year long with brief improvement in Q2 providing ultimately giving way to the rebound from offensive assets in the back half of the year.
The sections below will cover action in sub-asset classes within the following broader assets – domestic and international equities, commodities, and fixed income.
Domestic Equities - Sectors
After beginning 2025 with financials as the top sector, communication services and technology ultimately maintained the top two spots for most of the year, highlighting the broad technology and large cap theme remaining prevalent for a third year in a row. Industrials marked another year ranking in the top half of the DALI sector rankings, a trend that began in June 2022. Financials, consumer discretionary, and utilities were the sectors in 2025 that saw the most ranking changes with discretionary and utilities falling out of the top half of the sector rankings in the back-half of the year, while financials fell from first to fifth by year end. The sector with the most consistent improvement in 2025 was basic materials. Along with improvement in the Q4 from healthcare and energy, basic materials provided a boost for small cap stocks in the latter part of 2025. As investors enter 2026, sector leadership continues to maintain within offensive areas, but the relative gain within defensive sectors like basic materials, healthcare, and energy have the team monitoring the rankings closely.
International Equities
Leadership within international equities has maintained within the European region throughout 2025 with emerging countries sustaining the leadership baton. Consistent improvement within Latin America brought the region from the doldrums of the international rankings to the second position. Latin America’s improvement brought about relative deterioration within developed Europe and emerging Asia. While China remains one of the bright spots within emerging Asia, leadership out of emerging Europe and Latin America shows the broader international space favors emerging markets entering 2026. While lagging somewhat to emerging markets entering 2026, developed markets continue to show positive relative strength against broader commodities, fixed income, cash and currencies, along with segments of domestic equities. This highlights the broader strength by international equities shown in the asset class rankings above.
Commodities
Apart from a brief period in Q1, precious metals were the dominant theme within broader commodities throughout 2025 as the likes of gold and silver rallied to highs and had their best year in decades. Agriculture took the brunt of showing relative weakness as it fell to the last spot after beginning the year near the top of the commodity rankings. Energy weakness relative to other commodities have garnered attention in the back half of the year, which has led to a notable gap between relative leaders precious and industrial metals as 2026 begins.
Fixed Income
Leadership within fixed income remained within the U.S. high yield space throughout 2025. Areas that showed relative improvement against their fixed income counterparts in 2025 were U.S. corporate debt, long duration U.S. treasuries, and inflation protected debt. After seeing improvement in the first half of the year, international debt and short duration U.S. treasuries fell out of favor in the back half of the year. U.S. preferreds & convertibles along with municipal bonds were the notable areas of relative deterioration throughout 2025 and now rank in the bottom half of the fixed income rankings. Superior relative strength resides within the higher yield areas of the broader fixed income space as investors enter 2026.
