The global stock market has staged a remarkable comeback since its lows following the initial tariff announcements made by President Trump in April. The US market - as measured by the MSCI USA Index - is trading now at record highs in dollar terms, although the US dollar’s significant weakening means that it is still slightly below highs measured in other major currencies. The MSCI World Index has been further helped upward by its European component soaring, which is up by 12.5% in sterling in the first half of 2025.

If there is a common theme between the two sides of the Atlantic it is growth, but with very different drivers. In the US information technology shares are in the ascendency once more, fuelled by an investment boom in the build out of artificial intelligence computing capabilities. In Europe it is traditional industries that have seen share prices rise significantly as NATO countries, notably Germany, commit a greater proportion of their gross domestic product to defence spending. Defence companies have seen very positive sentiment in the equity market as a result, but a broader range of industrial businesses have also been caught in the updraft. A strong euro has kept interest rates in check on the continent, but this hasn’t stopped the banking and insurance sectors rising strongly. These European subsectors tend to exhibit relatively low returns on capital, whilst on the US side of the equation low yields and high valuations are the flavour of the month.

The sort of steady growth / high return on capital businesses that we seek at sensible valuations have been largely caught between these two market trends. Having exhibited defensive characteristics in the recent dramatic, yet blink-and-you-miss-it, market downturn, portfolio companies have not enjoyed the same positive sentiment as other areas of the market on the rebound. Operational performance has been robust and we remain confident about future prospects, although patience is required during the current upward market swing.