HALO - Heavy Assets Low Obsolescence

Vinay Tolia |
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Weekly Market Commentary

The bond market is repricing what can’t be disrupted.

Software credit spreads have widened 250+ basis points YTD. Meanwhile, infrastructure (PAVE) is up 35% over the past year and materials (XLB) are up 18% — both outpacing the S&P 500 (Yahoo Finance, as of 3/31/2026). The market appears to be rotating toward heavy assets with low obsolescence risk.

As we noted in Volatility Pulse, geopolitical fragmentation is rewarding tangible assets over software subscriptions. Defense spending, reshoring, grid buildout, and AI-driven power demand are creating structural tailwinds for the physical economy. For clients looking to add non-tech exposure with an income component, a PAVE/XLB basket may be worth exploring.

PAVE (Infrastructure) 27x Trailing P/E +4% YTD vs XLB (Materials) 27x Trailing P/E +9% YTD — 1-year performance chart vs S&P 500, data as of 3/31/2026

Ways To Express This View

Income: 3 YR / PAVE & XLB WoF / 12MNC / ~9% P.A. / 70% Coupon Barrier / 70% EKI

*Indicative terms only. Final pricing subject to market conditions at time of trade.

This material is for informational purposes only and does not constitute a recommendation. Data sourced from public sources and has not been independently verified. Past performance is not indicative of future results. Structured notes involve risks including potential loss of principal.