Performance review
Global equities made modest gains overall in December, rounding off a year of strong returns for the asset class. Stock markets mostly rose as investors balanced optimism around easing monetary conditions against inflation concerns and geopolitical tensions.
Despite the US Federal Reserve’s dovish stance, inflation risks remain balanced. Our focus on companies with pricing power is crucial in navigating these challenges. The risk of a deteriorating labour market in the United States (US) will however keep the market speculating on number of interest rate cuts over the next 18 months.
Our holdings typically demonstrate quality growth characteristics and compounding cash flow profiles. These companies tend to stay more resilient if we were to enter a weaker macroeconomic scenario. Our fundamental analysis and valuation discipline allow us to be positioned where valuation remains attractive.
Positive contributors
Chip manufacturer Nvidia rose on strong sector signals as other companies’ earnings reports pointed to robust AI capex, leading to bullish analyst momentum heading into year‑end.
Atlas Copco’s stock climbed, supported by expectations of a recovery in the semiconductor industry that could benefit its vacuum technology businesses.
Linde had a positive impact after an analyst note suggested that the stock’s weakness was overdone, given the company’s project backlog and its cyclical leverage if industrial production improves.
Negative contributors
Broadcom declined due to investor concerns over margin compression on less profitable AI sales, triggering profit‑taking despite strong earnings and backlog growth.
Microsoft was weaker on AI‑related concerns, including missed sales targets and worries over slower AI monetisation amid heavy capex.
Life sciences cloud software provider Veeva Systems was hurt by negative sentiment over slowing future growth, with analysts projecting decelerating revenue momentum, overshadowing strong results.
Activities
There were no new positions initiated or sales of entire positions during the month.
Outlook
Equity markets in 2026 will be shaped by macro forces through two key channels: the price of capital and the breadth of earnings revisions. While the focus remains on underlying company economics, shifts in the macro environment can quickly reprice opportunities.
The first driver is the cost of capital, which will depend on services inflation, fiscal dynamics and institutional credibility. A favourable scenario features a clearer disinflation path that allows easier policy without credibility risks and keeps long-term yields stable. The less favourable scenario combines persistent services inflation with rising term premia, creating valuation headwinds even as growth cools.
The second driver is corporate behaviour and its impact on the profit cycle. A contained slowdown—supported by reasonable pricing power and productivity—would limit earnings downgrades. Conversely, increased caution could lead to capex delays, broader cost-cutting, weaker hiring and more widespread profit warnings.
Policy and geopolitics remain fast-acting forces affecting costs and sentiment. Clearer trade policy would reduce friction and help margins, while geopolitical escalation would introduce input volatility, working‑capital drag and investment delays. Upside exists in potential progress in Ukraine; risks remain in the Middle East and China–Taiwan.
AI represents both an opportunity and a potential capital‑cycle risk. Productivity improvements and new profit pools are the upside; the downside includes overbuilding, digestion phases, uncertainty about returns and heightened regulation.
Long-term opportunities centre on ageing populations, rising data and power needs and the expanding AI ecosystem. These trends reinforce demand for productivity solutions, resilient and modernised energy infrastructure, and high‑value semiconductor and hardware capabilities where complexity drives defensibility.
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