Global Fund Update – September 2025

In the United States, Federal Reserve Chair Jerome Powell gave his annual speech at the Jackson Hole Symposium and appeared to indicate that the Fed is now able to lower interest rates after a considerable period of leaving policy unchanged. In recent months, Chair Powell has come under significant pressure to lower rates by President Trump and other White House officials, including Treasury Secretary Scott Bessent. Data released at the end of the month showed that US GDP growth was revised higher to 3.3% for the second quarter, but there is increasing concern now that the labour market has weakened and will continue to do so in the months ahead.

Fed Governor Christopher Waller, a voting member of the FOMC, has indicated that if upcoming data points to a further weakening of employment, he would be voting for a “jumbo” cut to rates. Governor Waller is amongst the front runners to take over from Jerome Powell and it would appear that he has moved to a stance that is supportive of the President’s desire to lower short term interest rates. Given persistent inflation and the unknown impact of ever evolving tariff policy, it is quite unclear how longer term bond markets would react to aggressive cuts to short-term rates.

The prospect of falling US rates alongside good growth and UK gilts rising alongside sluggish growth, seems to be setting a different background for the balance of our portfolio. The US equity market is dominated by large technology companies where very large investments in artificial intelligence are expected to drive growth for years to come. In the portfolio there is a selection of investments which stand to benefit but we find that second tier stocks offer better value than the largest companies. As examples, we own Broadcom but not Nvidia, Accenture but not Alphabet. Outside of the largest stocks, we can still find investments which offer good value for money, such as Schlumberger, the world leader in oil services, which trades on a PE multiple of 12 for next year. We do not, therefore, subscribe to the view that “US stocks are expensive” or that “AI is a bubble” though we do believe that one needs to be selective and insist on value for money investing in these areas.

 

Stocks & Portfolio Moves

August potentially provided the first signs that healthcare stocks may be bottoming out after a particularly difficult 2025 so far. Most of the stocks in our healthcare portfolio rebounded in August with UnitedHealth up 24% and Zimmer Biomet rising 15.8% after posting its best underlying results in a long time. Having reduced our holding in December, UnitedHealth has had a terrible 2025 after removing guidance earlier this year and seeing its CEO Andrew Witty step down. However, since its prior CEO Stephen Hemsley has returned and the company reset guidance in July, we believe the business is now better placed to improve operational performance and we added slightly to the position at the end of the month. Eli Lilly ended August virtually unchanged having been down 15% in the middle of the month after issuing a slightly disappointing trial readout for its oral obesity product orforglipron, although the second set of trial data for the drug released towards the end of August was better-received.

Burlington Stores produced excellent results that were comfortably ahead of market expectations as the off-price retailer continues to execute well and is enjoying the tailwind of the US consumer trading down. As ever, CEO Michael O’Sullivan, who has overseen a recovery in the business since he started in 2019, gave cautious guidance for the remainder of the year, which we think will prove to be too conservative. We believe that the company will deliver more than the 1-2% comparable sales growth currently forecast. In addition, management has been taking the opportunity to aggressively increase its store opening programme and this has led to overall revenue growth of around 8%. Burlington shares have been very volatile so far this year and despite rallying strongly, are only up 2% year-to-date.

We have continued to increase our position in Chinese equities and added a new position in ICBC in August, one of the largest banks in China. ICBC reported results at the end of the month which showed loan growth of over 6% in a broadly stable credit environment, where non-performing loans declined very modestly. We view ICBC as an attractive, value way of playing a recovery in the Chinese economy and we anticipate that there will be a stabilisation of the property market as inventory clears. It is not our view that government policy leads to a new boom in the property market, but that it is designed to do enough to clear the inventory overhang that is hindering confidence.

The Hang Seng index has performed well this year, rising 28% year-to-date and it is our view that the Chinese authorities see the stock market as a way of increasing consumer confidence, which they believe will lead to a pick up in consumer spending. Earlier this year, we began building a position in Alibaba, which reported results on the last day of the month which highlighted the continued strength of its AI and Cloud offerings, but also the weakness of the online retail business, which is embroiled in a price war with other Chinese e-tailors, who are offering loss making subsidies in an attempt to win customers in a battle for market share. However the investment community focus is on the growth in cloud and AI, with shares rallying just under 20% in Hong Kong on the first day of September trading following the results. We think Alibaba shares still offer excellent value as they are at the forefront of a government initiative to drive technology investment forward via AI.

Japanese equities rose 4% in August in local currency as investors continued to focus on the market’s attractive valuation and the improving corporate governance of companies that has been an increasingly important part of the investment case for Japan. We remain disappointed that stocks in our portfolio, such as Keyence and Toppan, have still not produced a credible strategy for improving governance, which we believe could prove a considerable value enhancement for shareholders.

In Europe, we remain optimistic about the prospects of a turnaround in Germany helped by fiscal stimulus after years of moribund growth. However, the prospects for France have become increasingly uncertain. Prime Minister François Bayrou has bravely called for a confidence vote in his own government, having failed to push through the financial reforms that he deems necessary to put France on a sounder financial footing as its fiscal deficit has risen to 5.8% of GDP, well above the 3% allowed by EU rules. French ten-year government bond yields have risen to above 3.5%, more than 75bps higher than in Germany and very close to the same costs incurred by Italy. Our investments in France reflect very little exposure to France’s domestic economy specifically, as LVMH is a global luxury goods company, L’Oréal is one of the world’s leading skincare companies and Schneider Electric is an exceptionally managed world leader in electrification and automation, two of the main themes in our funds. It is noteworthy that shares in Germany based Siemens, are up 28% year-to-date, while Schneider shares are down 11%, despite delivering what we thought were perfectly acceptable results with revenue growth of over 8% and a modest improvement in margins.

 

Outlook

We currently have a cash position of around 6%, which reflects a degree of discomfort on some very highly valued stocks, where we have been taking profits. However, we do see many opportunities to invest in quality companies that have recently been left behind in the AI gold rush.

 

Tim Gregory
Fund Manager
Goshawk Asset Management

 

Data source: Goshawk Asset Management, Bloomberg

 

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