Written by Cormac Nevin
Last week witnessed a new all-time high for global equity markets as measured by the MSCI All Country World Index in local and US Dollar terms. For Pound-Sterling based investors, the returns were good albeit still below the peak seen in February due to the strong appreciation of GBP over that period.
We are cognisant that the global indices are now dominated by the US and would highlight that markets such as Japan and Emerging Markets outperformed their global counterparts last week in GBP terms (+1.7% and +1.5% respectively). Fixed Income markets also provided a range of strong returns.
At the halfway point in what has been a tumultuous year for 24-hour news channels, it is worth reflecting how imperceptible the procession of global events have been to the returns of a long-term investor who looks at their Fund valuations monthly (or better still, quarterly).
A large part of the reason market participants became agitated in the first two quarters of the year is likely down to the fact that many are now overexposed to the US market after decades of outperformance, either to the equity market or the US dollar or both. This is particularly true for passive investment strategies which will buy more and more US exposure as its weight in global indices increases.
As we look forward to the latter two quarters of 2025, we are mindful of the value our process possesses by having a range of global exposures which feature healthy allocations to markets such as Japan, Emerging Markets, the UK and Continental Europe. While we have no idea about how specifically the rest of the year will play out, it is certainly plausible that having a range of exposures which are less exposed to the mood of the present occupant of 1600 Pennsylvania Avenue will stand to be a benefit.
Beyond equities, we are mindful of the value added this year by our diversifying asset classes, and see reasons for this to continue. Our blend of Absolute Return managers is up over +5% this year, well more than double the return of UK Cash rates while exhibiting zero sensitivity to the equity market.
Our Real Assets blend is up almost 7% this year, even under conditions whereby inflation has continued to be tame. In Fixed Income, our exposure to local-currency emerging market bonds finished the quarter with returns close to +14% for the year, which has been boosted by the continued weakening of the US Dollar as the result of the administration’s trade policies.
As ever, there is a world of opportunity out there for investors who are sufficiently diversified and long-term-oriented enough to capitalise on them.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. Past performance is not a guide to future performance.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 30th June 2025.
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