The tailwinds providing resilience to the market and the Global Growth Portfolio

‍

As the market rally continues, which factors are offering momentum, while also serving the resilience of the Global Growth Portfolio?

‍


Since the market sell-off in April, global equities have effectively been on a non-stop run.

‍

While the odd risk to the market rally has presented itself, little has stood in the way of a bull run that is increasingly mirroring the sort of trading action we saw in the wake of the COVID flash crash back in 2020.

‍

In fact, one could realistically build the case that there are a number of tailwinds that have added weight to the current market outlook and overall positive sentiment.

‍

Extending this further, it’s also not hard to see why our Global Growth Portfolio is leveraged to a number of encouraging developments.

‍

‍

Federal Reserve conviction

‍

Although the Federal Reserve is tipped to cut rates over the coming months - in itself, a boon for equities - the central bank has oftentimes signalled confidence in the world’s largest economy.

In turn, this has allowed US equities to hold gains, and it speaks to the natural resilience of the US economy, which of course underpins the stock market.

‍

As recently as the end of July, the Fed touted the underlying strength of the US economy, citing “solid” labour market conditions, while also avoiding negative language associated with a moderation in overall growth.

‍

Even if conditions may have softened since, the Fed, and in particular, Chair Jerome Powell, are on record as describing the US economy as being in a “solid position”.

‍

With rate cuts to follow, this is likely to shore up the economy and provide a further boost to the economic growth outlook.

‍

‍

Tech leadership

‍

It has long been recognised that US markets are heavily influenced by a small cohort of stocks, most of which come from the tech sector.

‍

While the sector’s leadership subsided a few months back, this trend has reversed course, with tech stalwarts rising to the fore once again to underpin the market rally.

‍

Overall, mega-tech companies like Apple, Microsoft, and Nvidia have maintained their share price momentum post-earnings, offering a vital foundation for investors to grow in confidence.

‍

In fact, this has also been a fundamental driver for our Global Growth Portfolio. The success of these names also represents a strong validation for our core holdings in said Portfolio.

‍

‍

Global economic conditions

‍

By and large, the global economic story is holding up well. Although concerns remain around China, the world’s second largest economy has still delivered solid growth.

‍

The slowdown being witnessed there might seem counterintuitive to equities strength, however, this ignores the reality that such conditions have only bolstered the case for fresh economic stimulus.

‍

Meanwhile, positive economic data out of Europe and Japan is supporting global growth sentiment. These economies have shown signs of improvement, and it is by no means a coincidence that this has also coincided with a first-half showing where equities from these regions outperformed the US market in USD-denominated terms.

‍

Our Global Growth Portfolio retains international exposure thanks to the diversified nature of several of our holdings, with a number of businesses that conduct operations across the world.

‍

‍

Earnings season beats the odds

‍

The most recent earnings season showcased resilient corporate performance despite uncertainty tied to trade tariffs and moderating economic growth.

‍

Across the period, companies largely topped expectations. In fact, approximately 82% of S&P 500 companies exceeded EPS estimates, which is well ahead of the 10-year average for said metric, which stands at 75%.

‍

Even more impressive, around 81% of companies beat revenue estimates, far better than the 10-year average of 64%. It was also the highest ‘beat rate’ in three years.

‍

The resilience of earnings season spread far and wide, initially underpinned by the banks, then given extra momentum courtesy of the tech sector, before being ably supported by results from consumer and healthcare names.

‍

With the above in mind, the diversity of our Portfolio lends itself well to such a backdrop, with sector results offering another layer of resilience to the underlying strength of our Portfolio - notwithstanding adverse foreign exchange movements.

‍

Nevertheless, despite a swathe of favourable tailwinds supporting both the market and the Global Growth Portfolio, we have chosen to make some adjustments to support targeting sustainable growth.

‍

‍

Portfolio Additions

‍

Amazon (AMZN) – Increased to 6%

‍

We’ve lifted our allocation to Amazon to reflect the company’s ongoing strength across multiple growth engines.

For starters, its AWS division remains the global leader in cloud computing, which is a market where we still see considerable growth over the coming decades.

‍

At the same time, Amazon’s logistics and e-commerce infrastructure retain exceptional pricing power, which is beneficial to growing earnings.

‍

As the tech giant pushes deeper into AI, we see significant opportunities for the company to monetise its capabilities and expand revenue streams to drive growth.

‍

McDonald’s (MCD) – Increased to 4%

‍

Having shown impressive resilience through economic cycles, we’ve made the decision to boost our holdings in McDonald’s.

‍

One of the key things we like about McDonald’s, especially in the face of an uncertain economic outlook, is the company’s defensive cash flows based on its pricing power.

‍

But unlike traditional ‘defensive’ names, McDonald’s has an impressive record when it comes to innovation, whether that be related to digital ordering, delivery platforms, or menu localisation. The company’s global presence and exposure to different economic cycles supports its status as an anchor consumer holding.

‍

Northrop Grumman (NOC) – Increased to 2.5%

‍

While NOC might be considered a defensive play, we actually like the company for its long-term growth outlook. This is a central factor in our decision to expand our position here.

‍

Keeping in mind the company’s operational capabilities, which include leadership across space systems, missile defence, and classified technology projects, we appreciate that NOC is leveraged to higher-growth defence segments.

‍

UnitedHealth Group (UNH) – Increased to 3%

‍

It is our belief that the various sell-offs in UNH this year have proved an opportune moment for investors to acquire a high quality business at an attractive price.

‍

As healthcare remains a long-term growth theme, we see UNH as being uniquely positioned amid unfolding demographic trends. It is the US’s largest integrated healthcare provider, and its diversified model - combining insurance, data analytics, and care delivery - offers both defensive stability and attractive growth.

‍

Waste Management (WM) – New 2% position

‍

A new addition to our Portfolio, Waste Management meets several of our criteria for investment.

Above all else, we consider it an attractive complement to our higher-growth technology positions. Key attributes of the company include inflation-linked pricing, recurring cash flows, and rising demand for sustainable waste solutions.

It is our view that WM could add further resilience to the Portfolio.

‍

‍

Portfolio Removals

‍

Nvidia (NVDA) – Reduced to 7%

‍

While it may come as a shock to some of our clients that we have chosen to downsize our position in Nvidia - the AI flagbearer that has almost single-handedly given life to the multi-year bull run - our decision reflects risk management.

‍

Ultimately, we continue to see immense upside over the long run for Nvidia as AI infrastructure becomes more important, but we are conscious about risk exposure after such rapid appreciation. Still, Nvidia remains a core Portfolio holding, reflecting its dominance in AI chips and expanding software ecosystem.

‍

Intuitive Surgical (ISRG) – Reduced to 3.5%

‍

Since we first took a position in ISRG, the stock has delivered significant returns. At first it was the smallest company we owned by market cap, but it has since grown into its value as the adoption of robotic surgery has accelerated globally.

‍

Despite the growth story, we’re trimming our position in ISRG slightly to lock in gains and manage position sizing. We retain strong conviction in ISRG’s long-term growth trajectory as robotic-assisted procedures are still only a fraction of the global total, which we believe gives ISRG decades of runway.

‍

Lockheed Martin (LMT) – Sold

‍

We’ve exited Lockheed Martin to redeploy funds into other opportunities where we see higher forward growth potential. While LMT remains a strong contractor, its focus is more aligned with mature defence platforms.

‍

Instead, we favour Raytheon (RTX) and Northrop Grumman (NOC), which have greater exposure to advanced defence technologies, missile systems, and space. We believe these firms are better leveraged to the future direction of defence spending.

‍

SGOV & SHV – Sold

‍

We’ve exited our short-term US treasury ETF positions, SGOV and SHV. With yields now stabilising, the opportunity cost of holding these instruments is rising, and we prefer to deploy capital into equities with growth and compounding potential.