Performance review
Global equities collectively delivered solid gains in October 2025, supported by a constructive shift in US-China relations, generally robust corporate earnings and ongoing artificial intelligence (AI)-related optimism. US equities performed broadly in line with a global index during the month, while Japanese and emerging market stocks both outperformed. European stocks lagged overall in October, held back by political uncertainty and an underweight exposure to technology-focused companies.
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
Netherlands-based chip-making technology supplier ASML rallied sharply on improving sentiment around memory spending for 2026 as well as diminishing concerns about Intel, one of ASML’s major customers.
Taiwanese semiconductor giant TSMC benefited from strong demand for its AI products and advanced manufacturing capabilities, with the company’s robust earnings underscoring its resilience and leading market position.
Alibaba, a China-based e-commerce and cloud services company, rose against a backdrop of a wider rally in Chinese technology companies driven by increased spending on AI infrastructure, progress on advanced microchips and the Chinese government’s push for self-sufficiency in this area.
Negative contributors
Technology conglomerate Constellation Software’s shares fell on concerns about the potentially negative impact of AI on its business as well as the retirement of its CEO/founder.
Cosmetics company L'Oréal’s stock fell as some analysts questioned whether the company could maintain its sales growth and margin expansion, given signs of softer US consumer demand and the end of a period of supercharged expansion in the Chinese market.
Deckers Outdoor declined on concerns about slowing growth in its flagship Hoka and UGG brands, as well as wider investor unease regarding softer US consumer spending and tariff risks.
Activities
We initiated a position in Amazon, a global e-commerce and cloud company. Amazon should benefit from a step-up in cloud demand as AI continues to ramp up, and in particular some of its key partners, such as Anthropic, increase their demand. Additionally, it should gain from group-level cost saves via the implementation of AI, increased automation in warehouses and still resilient demand for its e-commerce business, given its relative skew to consumer staples over discretionary products.
Other Buys: Broadcom, Galderma, Intuitive Surgical, LVMH, Trane Technologies
Sell: Chipotle
We sold our position in Chipotle, a US-skewed fast-casual restaurant company specialising in Mexican cuisine. The company is starting to see pressure on its volumes as consumers face heightened pressures on their wallets. Chipotle’s focus on a premium lunch offering also puts it at risk as and when more white-collar workers get displaced due to AI. As a result, we believe the group could face further headwinds in the future.
Other Sells: Deckers Outdoor
Outlook
The Trump administration's 'Liberation Day' tariffs caused market volatility, but a 90-day pause allowed recovery, fuelled by hopes of US-China de-escalation. Policy changes continue to affect corporate earnings, emphasizing business-friendly measures.
The macroeconomic outlook remains uncertain with potential slowdowns and mixed indicators. US inflation is expected to rise due to tariffs, potentially creating a scenario of lower growth and higher inflation. The Fed's dovish stance on rate cuts may be limited by inflation concerns.
We anticipate positive earnings momentum is seen in technology and financials, though cyclical sectors face tariff-related risks, possibly leading to profit warnings. US earnings growth is projected at 9%, down from 11%, while European earnings growth is expected at 8%, up from 6%, driven by Germany's fiscal policies. Valuations are high in the US, more attractive in Europe, and supportive in China.
Structural growth opportunities include energy transition, aging population, and AI. We continue to see our three seismic thematic opportunities as providing key areas of structural opportunities, although dynamics could change during the Trump presidency.
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