Multi-Asset Investment Views: No need to argue

Recent geopolitical developments have proven as unpredictable as they are unsettling, but however disconcerting they may be, we chose to look through the ‘noise’. From a purely financial standpoint, markets have remained largely unfazed. Events in Venezuela and Iran briefly lifted oil prices, but crude oil has entered 2026 burdened by a significant supply-demand imbalance.

Some geopolitical shocks can alter economic fundamentals in a lasting way, but many do not (see chart below). Not every global flashpoint translates into a structural market event - only those that fundamentally reshape key cost structures or supply chains have the power to move the pricing landscape in a durable manner. The recent dominant headlines do not meet that threshold. The unpredictability and sensationalism that characterise today’s policy environment tends to saturate the media landscape, carrying the risk that long-term investors could lose sight of underlying fundamentals.

What matters for us right now is clear: real US GDP growth in the fourth quarter of 2025 likely accelerated above 5% annualised, disinflation remains largely on track, and the technological revolution of artificial intelligence advances steadily. We are witnessing a healthy broadening of market participation, extending both within and outside the US, and crucially, beyond the technology sector. In the US, this is marked by a solid performance in high-beta, lower-quality segments. Simultaneously, tech giants’ valuations have retreated in relative terms, reflecting market anxieties over a potential capital expenditure hangover.

Furthermore, we believe this broadening rotation still has room to run. The monetary easing provided by the Fed’s three recent ‘insurance’ cuts, combined with the fiscal impulse from President Donald Trump’s ‘Big, Beautiful Bill’, is fuelling a cyclical recovery in earnings for small caps and sectors outside the technology sphere. Furthermore, the US administration’s focus on affordability — ahead of November’s mid-term elections — should continue to provide a floor for consumer‑oriented sectors.

Technology backdrop remains strong

Despite the broadening narrative, we have added exposure back into mega-cap technology stocks, which have underperformed, in relative terms, since November. Flow analysis suggests the conditions are increasingly favourable for a relative reversal, as positioning among discretionary investors in both technology and cyclical firms has converged toward neutral. In our view, current discretionary positioning does not adequately reflect the expected earnings trajectory. The fundamental backdrop for ‘Big Tech’ remains strong, and the upcoming earnings releases may provide the catalyst needed to re-energise investor interest and restore momentum to the sector.

Outside the US, we have shifted a portion of our risk allocation toward emerging markets to increase our sensitivity to Asia and the region’s tech‑oriented companies, as we head into the Q4 earnings season. The Eurozone, meanwhile, has delivered strong performance since last summer, and with expectations now running high, we see value in locking in some profits and further broadening exposure. We remain exposed to the Eurozone banking sector specifically, where we continue to see solid fundamentals that we believe can justify further re‑rating upside.

Key risks to monitor

On the fixed income side, our focus remains on the potential for higher rates following developments in Japan but also the outlook for Fed policy given the strong macroeconomic background. The recent repricing of Japanese government bonds matters far beyond Tokyo, as seen at times in 2025. Japanese yields still sit at the lower end of the developed market spectrum, and as a result, the adjustment has the potential to translate into reduced demand for overseas duration and to spill over into higher US and European rates. That transmission channel has been visible over the past few weeks and remains a key risk to monitor.

One implication is that the broadening we have seen in equities may face a more challenging environment should global rates push higher. Several of the market-leading pockets year‑to‑date - rate‑sensitive segments, speculative growth, and smaller capitalisations - traditionally benefit from falling discount rates and easier financial conditions. Our framework suggests the ‘danger zone’ for US duration begins at around 4.40% on the 10‑year Treasury, roughly 20 basis points above current levels at the time of writing. A continued steepening of the curve - whether driven by the translation from the JGB curve, firmer inflation prints or renewed political pressure on the Fed’s independence - could push long-dated bonds, starting with the 30‑year, back towards or above 5%.

Such a move would likely weigh more broadly on asset prices and provoke some consolidation across risk assets. We equally monitor credit market spreads as an early indication of any waning risk appetite given the tight levels and their positive correlation to expectations for future monetary policy.

In the current scenario, gold remains one of the most effective hedges in a multi‑asset portfolio. We continue to favour exposure to the metal, either directly or via gold miners. The latter offer leverage to spot prices while benefiting from improving fundamentals. With the US dollar generally trending weaker, and messaging from Washington unclear, we see a case for maintaining exposure to this diversification, where possible, within our global allocation.