Market review
- Global equities strong in October; fixed income markets mixed.
- Tactical overweights to equities and global high yield enhance 12-month returns.
- Exposure added to government bonds and cash.
While markets seem to have returned to their recent “norm” with growth stocks, the US and technology performing extremely well over October, returns from markets have broadened. It is partly because of this broadening that the Liontrust Multi-Asset team’s Actively Different investment process has added significant value over the last year.
2025’s characteristic risk-on tone continued in October with global equity markets returning 4.6% in sterling terms[1], racking up their seventh successive months of gains. On a 12-month basis, the positives were even more pronounced, and the strongest equity regions were emerging markets, Asia Pacific ex-Japan, Japan and the UK. These are regions in which we have overweight positions and have been highly supportive of our fund and portfolio performances. In fixed income, our overweight to global high yield has also been a key contributor over 12 months.
The scale of US exceptionalism in recent years has masked the benefits of diversification and, in many ways, made it appear a penalty on returns. But 2025 has once again shown the advantages of diversification.
A note of caution is required, nevertheless: many equity markets cannot be considered cheap today whereas they certainly were a year ago. In our most recent Tactical Asset Allocation (TAA), review, we shaved off a small amount of market risk. After the strong run in equities in recent months, we decided to rebalance our funds and portfolios by taking profits and adding exposure to government bonds and cash.
This does not mean that all equity markets are fundamentally expensive now, but it does mean the tailwind from valuation uplifts may be weaker from here. Despite this, we remain overweight to equities and positive on markets. The economic environment and outlook remain reasonable; and there is positive earnings growth.
Emerging markets lead once again
All the equity sub-sectors rose over October, led once again by emerging markets with a return of 6.8% in sterling terms. They have overtaken Europe ex-UK as the best-performing region year to date with a return of 27.3% in sterling terms. Close behind in October were Asia Pacific ex-Japan and Japan with returns of 6.3% and 6.0% respectively in sterling terms.
US equities also performed strongly in October with a return of 4.8% in sterling terms, but its year-to-date return of 12.6% was the least positive of the major equity markets. The UK and Europe ex-UK equities lagged over the month, but they were still in positive territory with returns of 4.2% and 2.8% respectively in sterling terms. Global growth stocks delivered 6.8% in October, which outstripped the 2.0% return of value stocks, both in sterling terms. Year to date, growth stocks have returned 17.1% versus 10.9% by value stocks, also in sterling terms[1].
Emerging markets have been major targets for President Trump’s tariffs, but they have paved ways to new trading partners and performed well year to date, having benefited from a weaker US dollar easing the debt burdens of many of their companies and sovereigns. In our third quarter TAA review, we noted that they were the most improved of any sub-asset in terms of composite scores, including corporate profits, investor sentiment and the underlying technicals, and we retain a positive four out five TAA outlook for them.
Fixed income market performances were mixed. Global government bonds, for which we raised the ranking from a neutral three to a positive four in the TAA review, delivered a positive performance. Government bond yields are higher, representing a longer-term opportunity. Raising the target allocation here means we can add to our non-equity allocations to further diversify our funds and portfolios and access a suite of yields that have drifted up.
Emerging market debt stood out once again in October with a return of 2.1% in US dollar terms. Global high yield and corporate bonds fell slightly, although they were still among the strongest fixed income sub-sectors year to date.
[1]Bloomberg, 3 November 2025
KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
The Funds and Model Portfolios managed by the Multi-Asset team may be exposed to the following risks:
- Credit Risk: There is a risk that an investment will fail to make required payments and this may reduce the income paid to the fund, or its capital value;
- Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss;
- Liquidity Risk: If underlying funds suspend or defer the payment of redemption proceeds, the Fund's ability to meet redemption requests may also be affected;
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- Derivatives Risk: Some of the underlying funds may invest in derivatives, which can, in some circumstances, create wider fluctuations in their prices over time;
- Emerging Markets: The Fund may invest in less economically developed markets (emerging markets) which can involve greater risks than well developed economies;
- Currency Risk: The Fund invests in overseas markets and the value of the Fund may fall or rise as a result of changes in exchange rates;
- Index Tracking Risk: The performance of any passive funds used may not exactly track that of their Indices.
The risks detailed above are reflective of the full range of Funds managed by the Multi-Asset team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
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