Global equities rebounded over the quarter, with the MSCI All Country World Index surging 11.7%. However, geopolitical uncertainty remained a central concern for market participants.

At the start of the quarter, the US introduced a series of abrupt trade tariff measures. Although these were partially rolled back in response to concerns over rising yields in the US sovereign bond market, the initial shock has already dampened global trade volumes. Notably, US goods imports fell by 19.8% month-on-month in April alone. Currently, several nations are engaged in negotiations with the US in hopes of reducing trade barriers during President Trump’s tenure. While the production and trade of goods have been declining as a share of global gross domestic product (GDP), persistent uncertainty could lead to unintended consequences such as reduced capital expenditure and increased corporate cash hoarding. That said, coincident economic indicators remain relatively strong, supported by the solid income and balance sheet position of the US consumer.

Market update  

Global equities rebounded over the quarter, with the MSCI All Country World Index surging 11.7%. However, geopolitical uncertainty remained a central concern for market participants.

At the start of the quarter, the US introduced a series of abrupt trade tariff measures. Although these were partially rolled back in response to concerns over rising yields in the US sovereign bond market, the initial shock has already dampened global trade volumes. Notably, US goods imports fell by 19.8% month-on-month in April alone. Currently, several nations are engaged in negotiations with the US in hopes of reducing trade barriers during President Trump’s tenure. While the production and trade of goods have been declining as a share of global gross domestic product (GDP), persistent uncertainty could lead to unintended consequences such as reduced capital expenditure and increased corporate cash hoarding. That said, coincident economic indicators remain relatively strong, supported by the solid income and balance sheet position of the US consumer.

In response to the uncertain environment, analysts have revised earnings expectations downward, particularly as many companies have withdrawn forward guidance. Meanwhile, the US Federal Reserve - key in setting the global cost of capital - has raised its Personal Consumption Expenditures (PCE) inflation forecasts while lowering its growth outlook. Fed Chair Jerome Powell has attempted to anchor long-term inflation expectations by framing the tariff impact as a one-off, short-term shock, akin to those seen during Trump’s first term. Nonetheless, this complicates the timing and scale of any future adjustments to the federal funds rate.

Despite efforts by the Department of Government Efficiency to curb fiscal slippage, only USD 190 billion had been saved as of 30 June 2025. The “One Big Beautiful Bill” may further undermine these efforts. Still, market participants have found some encouragement in the administration’s attempts to revive the narrative of US exceptionalism. On the flip side, concerns over rising government spending have pushed up term premium in the US bond market, weighing on fixed income returns on the long end of the curve. A similar dynamic is playing out in Japan, where the yield curve has steepened significantly amid growing concerns about debt servicing costs and fiscal sustainability.

In Europe, equity markets performed strongly, with the MSCI Europe Index gaining 11.9% in USD terms over the quarter. Investor sentiment was buoyed by the formation of a new coalition government in Germany, prospects for fiscal stimulus, and a weaker dollar, all of which contributed to a notable re-rating in valuation multiples. In the UK, economic data has turned more positive, with the Technology, Industrial and Utility sectors leading gains.

Emerging markets have shown notable resilience over the past quarter, with standout performances by South Korea and Taiwan. In contrast, Chinese equities have lagged, weighed down by escalating trade tensions with the US and a series of retaliatory tariff announcements. However, the recent unveiling of the People’s Bank of China’s comprehensive 10-point monetary policy plan appears to be aimed at bolstering investor confidence and stimulating domestic demand. This policy shift may help cushion the impact of ongoing geopolitical frictions and support a more stable outlook for Chinese markets moving forward.

Toward the end of the quarter, geopolitical tensions between Iran and Israel intensified, raising concerns about potential disruptions in global oil supply chains. This uncertainty initially drove oil prices higher as markets priced in the risk of conflict-related supply constraints. However, prices began to ease toward the end of June, following signs of de-escalation between the two nations, which helped calm investor nerves and stabilise energy markets.

Looking ahead, we continue to believe that US President Donald Trump’s policy decisions will play a pivotal role in shaping asset market trends. Recent developments suggest a growing emphasis on policies that favour Wall Street interests over those of Main Street. Nonetheless, the spectrum of potential economic outcomes remains unusually broad, and we remain vigilant to the possibility of sudden and significant policy shifts in the coming months.

Fund strategy

From a security selection standpoint, our equity exposure remains concentrated in our internal building blocks, primarily the Ashburton Global Equity Growth Fund and the Ashburton Global Leaders Fund. The former targets companies with strong free cash flow prospects, while the latter - now managed by Morgan Stanley Investment Management - focuses on high-quality businesses capable of compounding intrinsic value over time.

On the asset allocation front, we increased equity beta exposure during the April market drawdown, having previously maintained a defensive stance amid escalating global tariff tensions. We believe the adverse reaction in the US bond market prompted President Trump to reduce the effective tariff rate, thereby improving the macroeconomic backdrop and enhancing market investability.

Looking ahead, we anticipate that the “One Big Beautiful Bill” could deliver a meaningful fiscal boost to economic growth, potentially lifting earnings expectations across equity markets. In response, we have largely avoided the long end of the sovereign bond curve due to rising term premiums amid increased fiscal risk. Instead, we have diversified into unconventional fixed income instruments in the US, including:

• A bond steepener (which benefits from widening yield differentials between short- and long-term maturities),
• US high-yield bonds,
• US convertible bonds,
• Short-term Treasury Inflation-Protected Securities (TIPS).

In terms of currency positioning, we have reduced exposure to the weakening US dollar, favouring the British pound as a more resilient alternative.

Given the ongoing uncertainty surrounding global inflation and potential fiscal and monetary policy shifts in the US, we have implemented strategic hedges. These include allocations to gold and a beta-neutral fund, both of which form part of our alternative exposure within the SICAV Multi-Asset Funds.

Fund performance

The USD Global Growth Fund delivered a strong return of 8%[1] over the quarter, while the USD Global Balanced Fund gained 6.4%. Both funds outperformed their respective Morningstar peer groups, which returned 7.1% and 5.8%, respectively. This outperformance was primarily driven by a strategic asset allocation decision to increase equity beta exposure, which proved particularly effective during the April market drawdown.

Additionally, strategic hedges - most notably gold - contributed positively to performance over the period. From an equity building block perspective, we were encouraged by the robust rebound in the Ashburton Global Equity Growth Fund, with standout contributions from holdings such as Elf Beauty, Vertiv Holdings, Axon Enterprise, and Autolus Therapeutics.

On the other hand, performance was held back by the Ashburton Global Leaders Fund, where certain stock selections underperformed expectations. In particular, UnitedHealth Group and Becton, Dickinson and Company were notable detractors, and positions in both have since been exited.

Disclaimer:

Waystone Management Company (Lux) S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF) (ref A00000395 & S00000734), Waystone Management Company (Lux) S.A. is a company located in Luxembourg, L-1273 Luxembourg at 19, Rue de Bitbourg. This document is issued by Ashburton (Jersey) Limited (The Investment Manager) which has its registered office at IFC1, The Esplanade, St Helier, Jersey JE4 8SJ, Channel Islands and is regulated by the Jersey Financial Services Commission. Ashburton Investments is a registered trading name of Ashburton (Jersey) Limited. In the event a potential investor requires material risks disclosures for the foreign securities included in a portfolio, the manager will upon request provide such potential investor with a document, outlining potential constraints on liquidity & repatriation of funds; Macroeconomics risk; Political risk; Foreign Exchange risk; Tax risk; Settlement risk; and Potential limitations on the availability of market information. The value of participatory interests and the income from them may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to the future performance. Where an investment involves exposure to a currency other than that in which it is denominated, changes in rates of exchange may cause the value of the investment to go up or down. CIS portfolios are traded at ruling prices and can engage in borrowing and scrip lending. A full detailed schedule of fees, charges and commissions is available from Ashburton on request and incentives may be paid and if so, would be included in the overall costs. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has a right to close the portfolio to new investors in order to manage the portfolio more efficiently in accordance with its mandate. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton Investments is not authorised or permitted to communicate with potential investors, or to anyone who would be an unlawful recipient. The original recipient is solely responsible for any actions in further distribution of this document and should be satisfied in doing so that there is no breach of local legislation or regulations. This is a marketing communication. Additional information about this product, including brochures, application forms and annual or half-yearly reports, can be obtained from the Manager, free of charge, and from the website: www.ashburtoninvestments.com. In South Africa, the Fund(s) is/are approved for promotion under section 65 of the Collective Investment Schemes Control Act 2002. The Fund Prospectus, and further information including pricing and changes, may be viewed at the Fund’s representative office in South Africa: Ashburton Management Company (RF) Proprietary Limited (“Ashburton CIS”), 3 Merchant Place, 1 Fredman Drive, Sandton 2196. Ashburton CIS is an approved collective investment schemes manager regulated by the Financial Sector Conduct Authority and a full member of the Association of Saving and Investments South Africa.