Wise Multi-Asset Income

President Trump escalated his criticism of the Federal Reserve (or Fed, the US central bank) in June, demanding rate cuts of at least two percentage points, arguing the Fed had been too slow and had harmed the US economy. Despite this pressure, the Fed kept rates steady at 4.25–4.50%, citing tariff-related inflation risks. Economic data was mixed, with slower job growth, weak construction, and softer-than-expected inflation in May. The Fed cut its 2025 growth forecast to 1.4% from 1.7% and expects higher unemployment and inflation. Meanwhile, some Fed officials signalled openness to cutting rates soon, reflecting growing internal divisions. On balance, markets were slightly more optimistic that more interest rates will come before the end of the year. Markets were also buoyed as investor confidence grew that President Trump was rowing back from some of his more controversial policies – additional tariffs due to come into place early in July were delayed, certain trade deals were announced and section 899, which allowed the US to impose retaliatory taxes on certain countries, was removed from his Big Beautiful tax bill. Trump could also claim ‘wins’ of his own with the Group of Seven (G7) nations agreeing to a proposal that would exempt US companies from an existing global tax agreement whilst NATO countries (the North Atlantic Treaty Organization, a collective defence system of 30 European countries, the US and Canada) agreed to increase defence spending to 5% of GDP.

UK inflation eased slightly in May but remains high at 3.4%, with services inflation cooling to 4.7%. Business surveys show companies are cutting jobs and slowing price rises, strengthening the case for a Bank of England rate cut in August. Consumer confidence improved for a second month, but retail spending growth in May was the weakest this year. The labour market is softening, with rising unemployment, falling payrolls, and wage growth slowing to 5.2%. The Bank of England held rates at 4.25% in June but signalled a likely cut soon, citing subdued growth and weaker hiring. Meanwhile, Prime Minister Keir Starmer’s government made costly concessions on welfare cuts, worsening budget pressures and increasing the risk of tax rises in the upcoming budget.

Elsewhere, the European Central Bank cut rates by 0.25 points to 2% in June but signalled it is nearly done easing. Markets now expect at most one more cut this year. Meanwhile, China’s economy showed continued signs of weakness as industrial output growth slowed, home prices fell further, and manufacturing activity contracted for a third month, underscoring ongoing challenges even as retail sales improved.

Despite events in Iran, global investors were comforted that the extreme trade stance taken by the US in March continues to soften. The increased government spending in the US and in Europe coupled with reduced bad news on tariffs provide support in the short-term for the global growth outlook even it comes at the expense of higher borrowing, which investors appear largely happy to ignore. Global equity markets continued to recover from their March fall with broad-based positive performance across most major geographies. It was notable, however, that the US dollar continued to weaken, with a 10% drop against sterling year to date sufficient to mean UK-based investors continue to nurse losses on US equity holdings. Cooling inflation and subdued economic data helped to lift global bond markets. Commodity markets were helped by higher oil prices and reduced trade tensions between the US and China.

In June, the IFSL Wise Multi-Asset Income Fund rose 3.1%, ahead of the IA Mixed Investment 40-85% Sector, which rose 1.7%. At the half-year point, the fund has risen 11.1% which compares favourably to the IA Mixed Investment 40-85% Sector which has risen 2.6%. In recent years, the property sector has seen extremely high discounts to net asset values that have already adjusted to reflect the higher interest rate environment result in increased levels of corporate activity. During the month, the fund was on the receiving end of its third potential bid this year as Empiric Student Property received a tentative approach from quoted competitor, Unite Group. Similar characteristics are seen in the renewables sector, where higher interest rates, lower power prices and disappointing production have resulted in falling asset values. However, these have also been accompanied by extremely wide discounts that are likely to result either in predatory interest or the sale of assets to prove up the net asset values. During the month a bid for a quoted competitor lifted the values of the basket of renewables holdings we have been adding to the portfolio since their March lows, with Renewables Infrastructure Group, Bluefield Solar and Greencoat UK Wind all performing strongly over the month. With investor risk appetite continuing to recover, there was strong performance across our equity fund holdings, with our UK mid and smaller companies funds lifted by persistent levels of corporate takeovers. In addition, our commodity funds and private equity positions performed well.

We took profits in a number of strongly performing positions over the month, notably Pantheon Infrastructure, Empiric Student Property, Fidelity Special Values, ICG Enterprise and Blackrock World Mining. We increased our holding in Workspace following a reassuring set of results and strategy update from the new Chief Executive. We topped up our holdings in our renewables holdings and increased the holding the Premier Miton Strategic Monthly Income Bond Fund, a relatively low risk corporate bond fund. Given the strong rebound in markets in recent months, we have slightly increased the fund’s cash position.