Market Update • 25 July 2025
You will have no doubt seen from the Tideway App that portfolios have continued to rise strongly in the last month. Tideway’s largest portfolio by volume of investors – the Balanced Multi Asset portfolio – has made around 3% net fees in the last month. It is up around 22% net of all fees over three years, just under 9% in one year, and 5.5% in 2025 so far.
There have been a few bits of volatility along the way, but it has been three solid years of good returns. It won’t always be like this, but we should enjoy it while it lasts!
It might be easy to look around and say “well, everything has been rising”. It is being referred to as the TACO trade (Trump Always Chickens Out) as Trump has backed away from some of his more outlandish threats. The world seems to be coping with higher tariffs, economies rumble on (not too hot and not too cold), and no major financial disasters.
Snakes in the Grass
But look a bit deeper and this is not the case. US Dollar depreciation has been an obvious snake denting the return on US assets for the rest of the world, but excessive valuations and competition have hit many large global businesses:
- Investors in Novo Nordisk, the mighty Danish drugs giant, have lost half their money since it’s peak value in the summer last year, taking it from a $645bn valuation to $316bn in 12 months. Investors have made no money since the end of 2022. The company – who at peak value traded at 55 times earnings – has suffered from competition, particularly from Eli Lilly.
- French luxury goods company LMVH has also fallen around 45%, from c.$500bn to $280bn in value and from a value of over 30 times earnings, as spending on luxury goods have declined, especially in Asia.
- Closer to home, the drinks business Diageo has halved in value (from a more modest c$130bn valuation and 20 times earnings towards the end of 2022) as drinking habits, particularly amongst the younger generation, are changing.
A common theme here is that when valuations get stretched, businesses can continue to make money – just not as much as was expected, and their share prices get hammered. No doubt all these companies’ share prices will recover, but it could take several years to get back to peak values.
All three of these companies would come under the description of ‘high quality growth companies’; they’re strong brands, are well run, with long track records of increasing profits. They have been the darlings of fund managers like Terry Smith at Fundsmith, whose flagship fund has lost 6.5% in six months and made just 2.5% in the last 12 months.
The Ladders
By contrast, the ladders in recent months have been coming from under-loved sectors. The somewhat boring and deeply unloved (by investors) Deutsche Bank’s share price is up a whopping 68% in 2025 so far. Deutsche posted record earnings in its release yesterday, the highest since the financial crisis. At a market cap of around $70bn, if yesterday’s earnings are sustainable, the bank is valued at just five times earnings.
Deutsche is a name we are all familiar with, but there are a raft of financial companies going through similar recoveries and revaluations, especially in Europe.
The return on Deutsche Bank shares is almost four times the return in Sterling than the return on Nvidia shares this year. Now the world’s largest company, Nvidia has a market cap of $4.2 trillion – 60 times that of Deutsche and around 55 times its earnings (what could go wrong?!).
Tideway's Snakes and Ladders
The examples above go a long way to explain what we are seeing from our individual funds and managers.
The table below shows how each fund has performed and contributed to the performance of our Balanced Multi Asset portfolio in the last six months.
If we invested in them equally, the average return would be around 0.3%. We don’t, and the good news is that our higher weightings are generally at the top of the table
The three global value managers – Artemis, Redwheel, and Schroders – have done the heavy lifting. Our quality growth manager, Heriot Global, is doing a bit better than Terry Smith, but still having a tough time, along with our US funds.
The two fabulous tables below from our analyst Costa Michaelides are created by looking through to the underlying holdings of the Equity funds we are currently invested in, and which are outperforming the MSCI world index, to see where the returns are coming from.
Table 1: By Region
This shows we have been getting most of our returns in the last six months from Europe, Asia, and the UK – 7.1% in total – and all three are regions where we are overweight versus the index. It also shows a 23% underweight position to the US – the worst performing region thanks to the US Dollar fall.
Table 2: By Sector
This shows how that return has been derived from specific company sectors, with more than 50% of our equity return (3.6% out of 6.9%) coming from investments in financial companies. Again, we are overweight financials versus the benchmark, with an underweight position in technology.
Financials have been unloved until now but are performing much better with higher interest rates
We know why we have tilted the equity portfolio this way and it is great to see our managers delivering the goods.
In this piece, Nick Gait takes a deeper dive into South Korea, explaining how our active managers are profiting from this stock market.
