Wise Multi-Asset Growth

That said, as we saw with the UK trade deal back in May, it is noticeable that the details of deals tend to vary markedly depending on whether they are reported by the US or their counterparts, as Trump is keen to hurry announcements in order to claim political victory and/or force the other party into a corner, while other countries are keener to iron out all the practicalities of how any deal would work. As such, despite announcements made last month, one should expect the tariffs situation to remain fluid (for example, France and Germany are contesting part of the EU trade deal at the time of writing, as is Japan with their own deal). For financial markets, however, the progress so far, set in stone or not, significantly reduces the risk of the worse-case scenario of trade wars feared in April. It is now clear that the tariff risks have been priced into so called risk assets (equities and bonds) and the incrementally positive news in July helped push a range of equity markets to new all-time highs.

Meanwhile, despite a small uptick in inflation, the US economy continues to show resilience, promoting the narrative that fears about the impact of tariffs on US corporates and consumers were unfounded. We would caution that it will take months for corporates to react to the new trade reality, once they deplete their stocks and face higher costs that will either impact their margins or impact the end consumer. This is the view of the US central bank who, despite intensifying pressure from Trump, stuck to its wait-and-see approach and kept interest rates unchanged in July. For now, reported earnings are good, particularly in the AI (Artificial Intelligence) space, which reassured investors, and pushed Nvidia (the AI chip manufacturer) to be the first company ever to reach a $4 trillion market capitalisation, only to be followed a few weeks later by Microsoft.

The positive sentiment in the US was broadly shared across the world with most equity markets posting strong positive returns (with a few exceptions like India and Brazil were trade negotiations have, so far, failed). It also helped the US Dollar recover some of its losses since the start of the year. Ballooning deficits in developed countries, made worse by the passing of Trump’s One Big Beautiful Bill Act in the US and U-turns on cost-cutting measures in the UK, and the risk of a return of inflation remain a concern for bond investors, however. Combined with high equity valuations and pockets of exuberance like Bitcoin at an all-time high, it continues to be a supportive environment for gold creating an interesting dynamic where both equities and the precious metal trade at record levels. This might reflect either too much complacency about risk from equity investors, or too much fear from gold investors. Given the uncertain world we live in and the absence of much cushioning from valuations which are back to extended levels, we tend to lean towards the former hypothesis.

In July, the IFSL Wise Multi-Asset Growth Fund was up 3.8%, behind the CBOE UK All Companies Index (+4%) but ahead of its peer group, the IA Flexible Investment sector (+3.5%). Drivers of performance during the month were wide-ranging as our equities (developed and emerging) and commodities holdings were generally supported by the positive investor sentiment. Healthcare was our strongest performing sector, continuing the recovery we noted last month after a gruelling few months. Our two dedicated biotechnology names in particular (International Biotechnology Trust and RTW Biotech Opportunities) benefitted from more encouraging noise coming from the White House, with the launch of the MABA initiative (Make American Biotech Accelerate) stressing that the government is aware of the significance of the sector. Corporate activity, such as the acquisition of Verona Pharma in the RTW portfolio by Merck at a 23% premium to its closing share price, also remains a supportive theme for the sector. Our private equity names (Oakley Capital, Pantheon International, ICG Enterprise) also performed well, following the take-private deal in Apax Global Alpha, a competing listed private equity trust, at a 17% discount to Net Asset Value versus the 40% discount it was trading at before the deal was announced. While a specific case in the sector, it highlights the increasing realisation that discounts in many investment trusts are too wide, leading to corporate activity.

In terms of portfolio activity, with the strong rebound in risk assets since April, valuations looking stretched in key parts of the market, volatility being low, and pockets of exuberance appearing, we continued to err on the side of caution. We thus raised some cash from our most profitable positions last month, particularly where discounts have moved sharply tighter, such as in Templeton Emerging Markets, BlackRock World Mining, Fidelity Special Values and Oakley Capital. Our views on their underlying assets remain positive but tight discounts leave us exposed to potential shocks, so this course of action seems sensible to protect the portfolio in the short term. Longer-term, we believe that valuations in our holdings, which are not part of the hyped assets described above, remain attractive.