Global Fund Update – March 2025
After a strong start to the year in January, February was a more difficult month for global equities. The Goshawk Global Fund is up 2.7% year-to-date after falling by 2.3% in February.
US economic data appears to have weakened materially in recent weeks: the Atlanta Fed GDPNow forecast for the first quarter has showed a marked deterioration in recent days, falling from expected growth of 2.3% as of 19th February to a quarterly decline of around 1.5% by the end of the month. Personal spending and income data for January released towards the end of the month showed spending declined 0.2% compared to estimates for a similar rise.
In addition, the Conference Board Consumer Confidence reading showed a 9 point decline on the prior month to 72.9 with any drop below 80 usually seen as a precursor to recession. Not surprisingly, against this backdrop ten-year US Treasury yields have fallen from a recent peak of 4.8% to just 4.25% and short term interest rate expectations are once again pricing in at least two further cuts from the Federal Reserve this year. We suspect that the very aggressive cost-cutting and job losses in US government departments as part of Elon Musk’s Department of Government Efficiency plans has led to a knock-on effect on confidence.
In addition to the current deterioration in US consumer confidence, growth may also be hindered by the imposition of increased tariffs on China, Canada, and Mexico, which came into effect at the start of March. The geopolitical outlook has also become highly uncertain, as witnessed by the astonishing 28th February meeting in the Oval Office between President Trump, Vice President Vance and President Zelenskiy of Ukraine.
Portfolio News
Given this increased uncertainty, we have added further to the defensive parts of the Global Fund portfolio by increasing positions in Johnson & Johnson and Procter & Gamble.
Nvidia produced another astonishing set of quarterly results in February that completely failed to astonish the market. Although the shares fell 8% on the day of results, gains the days before and after meant that the stock hardly moved despite delivering over 100% year-on-year profit growth. We began the process of reducing our exposure to Nvidia over a year ago and now have a position size of around 1.5%.
Rolls-Royce has had a very strong start to 2025, adding to strong gains over the last few years following another superb set of results that led to substantial earnings upgrades with the stock also providing some exposure to increased European defence spending. Since CEO Tufan Erginbilgic described the company as a “burning platform”, sending the stock to 73p per share, shares have risen to a quite remarkable high of 744p and are up 31% year-to-date as of the end of February.
We added a new position in HSBC to the Global Fund in February as we see new management continuing the bank’s improved performance of recent years and that the shares offer investors a very good yield and an improving return on equity from a strong capital base. HSBC offers a differentiated geographical exposure to other banks being represented in China, the UK, and Mexico, which are all potentially contentious in their own way. However, we believe this creates a nice balance to our existing banking exposure from Morgan Stanley in the US and the two Japanese financials that we own.
In Japan, we added a new position in life insurance company Dai-Ichi Life to balance our Japanese portfolio further between our exposure to global exporters such as Keyence, Shimano, and Shin-Etsu Chemical, and domestic exposure that is geared to the continuing rise of Japanese bond yields, which have moved from well below 1% a year ago to around 1.4%.
During the month we took profits in Toyota Motor as part of this rebalancing, even though the valuation remains cheap and there may be improved corporate governance. There is also considerable uncertainty both around the trajectory of the global auto industry and regarding tariffs. After a very long period of weakness, the yen has started to rebound a little and as bond yields have risen, and it is starting to re-establish itself as a risk-off currency.
In China, economic data has modestly improved this year as the major inventory overhang for the embattled property sector starts to clear and the government enacts policies designed to improve both consumer spending and stock market performance. The luxury goods sector has started to perform better in 2025 as a result and Moncler produced a fine set of results in February. Moncler showed excellent execution, notably in China where the company has previously been under indexed relative to other luxury firms in terms of domestic Chinese store count.
L’Oréal also produced a very solid set of results against a difficult market backdrop and, although the stock has not performed well since we included it in the portfolio towards the end of last year, we continue to believe this is an outstanding franchise which is selling at valuations that are rarely seen, while we remain confident that the brand has not lost any of its popularity in the critical Chinese market.
Outlook
Our exposure to the so-called BATMMAAN* trade is now broadly half the overall market weight, with zero weightings in Apple and Tesla and, as noted earlier, a significantly reduced holding in Nvidia.
While we remain very optimistic about the long term importance of AI, and it remains central to our investment thinking as a core long term growth theme, we are conscious of just how successful this trade was in 2024 and certain themes have become highly correlated, so we have modestly reduced the risk weightings in this part of the portfolio.
There is clearly a great deal of uncertainty in global equity markets at the moment and we have added to defensive exposure to reflect this situation and still have a cash weighting of around 8%. However, we do believe it is important to maintain overall balance in the portfolio as there are so many possible outcomes for markets as we move through 2025.
Tim Gregory
Fund Manager
Goshawk Asset Management
*BATMMAAN – Broadcom, Alphabet, Tesla, Meta Platforms, Microsoft, Amazon, Apple, Nvidia
Data source: Goshawk Asset Management, Bloomberg
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