Global, developed-world mid-cap stocks rose notably over the twelve months ending 30 June 2025. A deeper dive revealed that it was indeed a tale of two halves, where the strong uptrend in the first six months of the review period contributed to this outcome. Investors kept a close watch on the US Federal Reserve’s interest rate decisions, as well as stimulus announcements from China, where favourable outcomes in September 2024 drove stocks higher during the first half. Donald Trump’s election as the next US president in November also contributed to gains as it prompted speculation about tax cuts and higher deregulation of businesses in the US.
However, concerns about the US imposing additional tariffs on its key trading partners took centre stage in the second half of the review period and peaked after the ‘Liberation Day’ tariff announcements on 2 April 2025. These announcements were far reaching and exceeded projections, both in the scale and the range of trading partners affected, which caused panic in global stock markets. While investor sentiment recovered after short-term reprieves were offered as the US began negotiating deals with its trading partners, investors were reminded that the China–US tensions are likely to endure, which will continue to have a multiplier effect on global inflation and supply–demand dynamics.
Over the review period, our investment process and its focus on striking the appropriate balance among quality, value, transition and momentum-led holdings remained consistent and has continued to deliver strong outcomes. We benefited from our security selection in the US, particularly in information technology where our research identified our leading contributor, AppLovin, at a crucial inflection point as it transitioned to a quality holding. Our decision to re-invest in Siemens Energy in light of a grid upgrade cycle, as well as gaining much more comfort around the strength of the balance sheet, proved rewarding as the company delivered encouraging earnings growth subsequently. We remained aware that concerns began to build about high valuations, inflation, market confidence, global geo‑political risks and tariff-driven cost pressures. The portfolio progressively reduced exposure to high-valuation quality names and focused on opportunities in high free-cash-flow businesses with reasonable valuations and strong quality of profitability.
We aim to manage risks given the volatility anticipated over the next twelve months, given the unpredictability of decision making in the US, as well as the reality of the impact it has on economic and corporate decision making. This calls for a more measured approach to portfolio construction. Investors overall will pay extra attention to earnings growth and their ability to support valuation multiples.
The focus of the portfolio remains on companies that are market leaders with good pricing power to grow or maintain margins, exposure to end-user growth and credible management teams. At market level, we remain conservative in our US exposure but
retain conviction in key holdings whose prospects are encouraging. The portfolio remains balanced, with robust positions in technology, industrials, healthcare, and consumer sectors.
