Global Fund Update – August 2025
Global equities performed strongly in July, rising by 1.3% in Dollar terms, as the market appeared to be relieved at the prospect of various US trade agreements which were not as bad as may have been feared at the time of the ‘Liberation Day’ announcements on 2nd April. The Goshawk Global Fund rose 2.4% in July, benefitting from the strength of a number of positions and from the fall in Sterling against the US Dollar, which had been hampering absolute performance in the first half of the year.
US GDP data for the second quarter came in ahead of expectations, benefitting from the reversal of the net trade impact in the first quarter ahead of the imposition of tariffs. With inflation ahead of target, and the impact of tariffs still yet to be felt, the Federal Reserve continued to leave rates unchanged at the end of the month, much to the annoyance of President Trump. The August non-farm payrolls data released on 1st August indicated a US jobs market that was slowing, but other related data had been contradictory to this earlier in the month. President Trump has continued to be vocally critical of Fed Chair Jerome Powell, calling on him to cut rates by as much as three percentage points to accelerate growth in the economy. As Powell’s term as Fed Chair comes to a close, there are a number of candidates emerging to replace him, including current Governor Christopher Waller, who is now a dissenting member of the FOMC having voted for a rate cut at the last meeting.
Stocks & Portfolio Moves
US stocks have had a tremendous run since bottoming out in early April. The strength in equities has been increasingly narrow and led by components of the so-called “Magnificent Seven” that are seen as the key beneficiaries of the explosive growth in the use of artificial intelligence. Meta and Microsoft had results in July that materially exceeded expectations but continued to be accompanied by plans to spend vast amounts of capital on building out their data centre footprints. We have continued to add to our holding in TSMC, which we believe is one of the best managed companies in the world and, unlike so many of the chip-related AI stocks, still sells for what we consider a very reasonable valuation. By contrast, we have trimmed our position in Cadence Design Systems, which is one of the world’s leading Electronic Design Automation companies. Cadence produced a very solid set of results showing revenue growth of around 13%, and modestly increased full year guidance, sending shares higher by nearly 10% on the day of results. While we still believe Cadence to be a fine company, we see a market capitalisation of $100billion rich for a company forecast to generate around $6billion in revenue in 2026.
This is a conundrum we face in several of our stocks which have performed well in the first half of the year. We have continued to reduce our holding in Netflix to reflect not only the stock’s impressive performance but also a valuation that we now find to be very stretched. In July, Netflix issued another strong set of results that highlighted the resilience of its franchise, even when consumer spending slows.
Similarly, Spotify continued to generate robust growth, but saw its share price fall quite sharply as it continues to invest in future opportunities along with facing a hefty bill for employee stock-based compensation given its strong share price performance. We believe Spotify is a less mature streaming business than Netflix and is still in the process of fully monetising its franchise, but after a tremendous run, a period of consolidation is now warranted.
In Japan, inflation is proving persistent and the Bank of Japan may still raise rates again later this year as part of the process to normalise rates and stabilise the yen, which has been weak for a considerable period of time (notably against the US Dollar). Japan finally concluded a trade agreement with the US in July, setting tariffs at 15%, which was taken well by the market and led to a solid rally in Japanese equities. We were a little disappointed with the rate Japan ended up accepting, but the Japanese companies in our portfolio continue to demonstrate resilience. Mitsubishi Electric issued a fine set of results which continued to show strong growth in their emerging defence business, and the core Life segment, which contains the heating & ventilation division, produced another solid set of results.
Although we acknowledge that the recovery in China is taking time to emerge, despite first half GDP growth exceeding the government’s 5% target, we have continued to add to our exposure in this market. In July we added to both our luxury goods positions, LVMH and Moncler, after they both posted satisfactory results which demonstrated they were still executing well in a tough environment. We see both companies as being able to benefit from a recovery in consumer confidence, which we believe is the key component of the Chinese government’s plan to rejuvenate growth. L’Oréal’s results were once again very reassuring and showed signs of recovery in the mainland Chinese market, while travel retail continued to be an extremely difficult business. L’Oréal shares have performed better this year than our other luxury names and it remains a core holding within the portfolio.
Healthcare stocks have had an exceedingly difficult year so it was pleasing to see a bounce in Thermo Fisher shares following a reassuring set of results. The company acknowledged that sales growth of 3% is below their aspirations, as spending budgets remain under pressure, particularly in biopharma and in scientific research departments that have been hit hard by spending cuts driven by the DOGE programme to reduce government spending. However, on the earnings conference call, management maintained an optimistic tone with respect to long-term spending in the healthcare industry and said that they expect to grow revenues by over 7% over the long term.
Outlook
As tariff agreements have now been signed with many countries, it remains to be seen what the economic impact will be on the US and other key global economies. After a great run for equities, we have taken some profits in stocks that have performed well and where valuations have become stretched. We are running a cash weighting of around 7% and are still finding lots of potential new ideas to add to our portfolio that have been left out of a rally fuelled by little other than the boom in spending and excitement around the future of artificial intelligence.
Tim Gregory
Fund Manager
Goshawk Asset Management
Data source: Goshawk Asset Management, Bloomberg
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