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Meeting held: 9 June 2025
Next scheduled review: 29 September 2025
Action: No changes to the model portfolio
Markets may be noisy, headlines ever more sensational, and policymakers increasingly reactive - but beneath the surface, the investment case remains intact. The committee has reviewed the data, challenged assumptions, and reaffirmed its position: the current portfolio allocation stands.
Trade Policy: A Lot of Sound, Not Much Fury
The global trade narrative has shifted from crisis to theatre. The much-hyped 145% US tariffs on China haven’t materialised; instead, a more modest 10% “floor” appears to be the new normal. Markets have already priced in the reality: tariffs are here to stay, but they’re not derailing growth.
Bottom line: the trade panic was overblown. Investors who stayed the course were right to do so.
Deficits, Debt and the New Rules of the Game
Government deficits continue to swell - especially in the US and UK - but the old mechanisms of market discipline are broken. Central banks have all but neutered the bond vigilantes. Bond yields no longer serve as a brake on spending; instead, they’re part of the machinery.
Yields are pinned between 4.5–5%. That’s high enough to cause discomfort, but not enough to force change. The implications are clear: deficits may be here to stay, and investors need to plan for a world where central banks quietly manage the fallout.
Rates and Inflation: The UK Trails the Pack
In the UK, inflation sits stubbornly at 3.5% - well above the 2% target, and well behind peers. The Bank of England doesn’t expect to hit its inflation goal until 2027. By contrast, the ECB is already cutting rates, and the US looks on track for a soft landing.
This isn’t just cyclical; it’s structural. And it reflects policy drift and fiscal fatigue. The UK remains one of the more inflation-prone economies in the developed world.
Portfolio Performance: A Currency-Driven Headwind
Equity markets have rebounded, but diversified portfolios haven’t kept pace - and for good reason. A nearly 8% fall in the dollar has hit returns when translated into sterling.
But the fundamentals haven’t changed. Currency moves mean little over the long term, and the valuation gap in small caps still warrants our overweight. Bonds remain stable. There is no case for rebalancing at this time.
Allocation Stays Put
Current structure:
- 45% Large Cap Equities
- 30% Small Cap Equities
- 5% Emerging Markets
- 20% Bonds
No changes. The overweight to small caps is still justified. The case for hedging US bonds is growing - but not yet actionable. The dollar appears oversold; hedging now would be locking in losses. We'll continue to watch this closely.
Outlook: Ignore the Noise, Trust the Process
The disconnect between market fundamentals and media narrative has rarely been wider. Economic data is telling one story; the headlines are telling another. Investors who react to headlines instead of evidence risk making the wrong move at the wrong time.
Our approach remains grounded in data, valuation, and long-term outcomes. We see no reason to deviate.
The next formal review will take place on 29 September 2025. Until then, we stay invested - and stay disciplined.