Nobody’s a crystal ball (and that’s OK)

This note contains an overview of our market views, what we are watching, and our portfolio strategy. Any reference to portfolio positioning relates to our Flagship Solution. Clients with bespoke discretionary or advisory portfolios should consult their Client Advisor for the latest update on your portfolio.

The House View on investing with conviction

A key pillar of our investment philosophy is investing with conviction. There’s no rigid formula that really works; it’s about finding balance. We tilt portfolios towards our base case while keeping alternative scenarios in mind. That’s how we diversify across asset classes and geographies – seizing opportunities wherever we can find them and mitigating risks wherever they come from. We trade tactically when it makes sense, but we avoid unnecessary back-and-forth. Conviction means knowing when to act and when to hold back.

What trading can and can’t do

Trading has its place. It helps us respond to new information and position for short-term trends. We trade to rebalance portfolios when asset weights drift from targets, and we act when market flows, momentum and positioning align with our views. But trading alone doesn’t drive performance – especially after costs.

Once markets move, the opportunity often passes. At that point, the choice is to stay invested to compound returns over longer horizons or immediately lock in gains (or losses). Consistently predicting future events, such as corporate earnings surprises, interest rate cuts or hikes, or overall market moves, is extremely difficult. That’s why we focus on what we can control.

Preparing for different outcomes, not predicting them

If forecasting every market move is unrealistic, how do we invest with conviction? The key is preparing for a range of outcomes. A globally diversified portfolio spreads risk across regions and asset classes. It evolves with opportunities and challenges across both short- and long-term horizons. For example, if trade tensions rise and equities fall, our short-dated government bonds may help offset losses. This approach removes emotion and compounds returns over time.

Conviction is not about certainty. It is about clarity, discipline and preparation. We use economic forecasts to inform our decisions and as a communication tool. But we don’t try to predict every market move. Instead, we build portfolios that are resilient, diversified and responsive to change. That is how we help our clients stay invested with confidence – through cycles, surprises and opportunities.

Our investment convictions today

Take gold: its price has risen by about 50% year-to-date, as investors sought protection from geopolitical uncertainty and sticky inflation. However, the price has now reached our near-term forecast, and we think the outlook for further gains is limited. Recent buying appears more speculative than fundamental, with less support from emerging market central banks. So, we’ve reduced our gold position. We’ve used the proceeds to buy UK gilts, increasing our overweight position, as we think yields are attractive.

We’re also adjusting our Japanese government bond allocation. Our original position aimed to benefit from the yen appreciation we were expecting. But following the Japanese election outcome, signs point to more fiscal stimulus and potentially fewer interest rate hikes. While we still like Japanese government bonds for the diversification they provide, we no longer hold conviction in our yen position. We’ve therefore swapped our yen-denominated Japanese government bonds for a euro-hedged version, which also offers a yield advantage over our previous position.

If there is any content / terms in this article you are not familiar with, please take a look at our Glossary.