default title

Global equity markets extended their strong performance in the third quarter of 2025, driven by a surge in enthusiasm for generative AI and significant investment in semiconductors. Despite ongoing concerns about trade policies and valuations, the MSCI All Country World Index reached unprecedented levels, marking a 7.7% return. The market's focus remained squarely on AI, with semiconductor companies experiencing robust growth due to continuous capital deployment into AI infrastructure projects.

Regional market dynamics varied, with U.S. equities leading the charge thanks to strong economic growth and corporate earnings. Japanese stocks also maintained their positive momentum, bolstered by corporate reforms and economic reflation. Emerging markets, particularly China, saw substantial gains, propelled by AI optimism and supportive government policies. Conversely, non-U.S. equities, especially European stocks, showed more modest growth, and the U.S. Dollar stabilized after an earlier depreciation. Amidst this backdrop, the U.S. economy displayed surprising resilience, with a revised annual growth rate of 3.8% in Q2, primarily driven by technology capital expenditures and AI-related spending, which notably outpaced consumer spending contributions. The Federal Reserve, shifting its focus towards employment, made its first interest rate cut of 25 basis points this year, with further cuts anticipated. The unwavering 'risk-on' sentiment in the market has predominantly favored high-beta growth stocks, challenging traditional quality growth strategies.

In response to these market shifts and emerging opportunities, the portfolio made strategic adjustments in Q3 2025. New positions were established in NVIDIA, Broadcom, Taiwan Semiconductor (TSMC), Boston Scientific, and Uber. These investments reflect a renewed conviction in the long-term earnings trajectory of leading AI chip manufacturers and innovative medical and technology companies. To fund these new acquisitions, existing positions in ADP, Airbnb, Accenture, and Thermo Fisher Scientific were divested. The portfolio managers acknowledged their previous cautious stance on semiconductors but noted that new data points, such as Oracle's massive cloud contracts, U.S. tax incentives for data centers, and significant capital expenditure plans from major tech firms, reinforced their belief in the sustained growth of AI-related hardware demand. Despite the market's narrow focus on a few dominant tech giants, the portfolio remains committed to a diversified approach to high-quality growth companies, anticipating that their underlying earnings profile will eventually drive long-term returns.

The strategic adjustments within the portfolio in Q3 2025 demonstrate a forward-thinking approach to capitalize on transformative technological advancements while adhering to a core philosophy of quality and long-term value. The focus on companies with strong competitive advantages and robust earnings growth potential, even in a volatile market, underscores a commitment to sustainable investment principles. This adaptive strategy, coupled with meticulous research and a willingness to evolve perspectives, positions the portfolio to navigate market complexities and deliver enduring value to investors. Such an approach not only aims for financial success but also champions innovation and economic progress, highlighting the dynamic interplay between insightful investment decisions and the broader landscape of technological evolution.