| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
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| - | - | - |
Global economic activity slowed in Q4 2025 led by China, but remained more resilient than expected following Trump's tariff announcements. Lower-than-expected inflation created goldilocks conditions that supported risk assets, with global equities returning 3.2% in Sterling terms. The key shift is that government policy now drives economic outcomes rather than the reverse. Central banks diverged with the Fed cutting rates to 3.50-3.75%, while Japan raised rates to 0.75%. Signs of financial stress emerged with record usage of the US Standing Repo Facility. Looking ahead, front-loaded US fiscal stimulus, German-led infrastructure spending, and Chinese policy easing should drive global growth re-acceleration in 2026. Global equities are positioned for strong performance supported by broadening earnings growth, easing rates, and fewer policy headwinds. The US and Asia should lead growth, particularly from continued AI investment. Europe benefits from improving credit conditions and attractive valuations, while emerging markets should outperform on lower rates and stronger earnings growth.
Global economic activity decelerated in Q4 2025 but remains resilient, with policy interventions now driving economic outcomes more than traditional market forces, setting up favorable conditions for equity markets in 2026.
The manager expects a re-acceleration in global growth during 2026 and starts the year in an optimistic frame of mind. Global equities are expected to perform well supported by broadening earnings growth, easing interest rates, stronger company profits and fewer policy-related headwinds. The US and Asia are expected to lead global growth.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 5 2026 | 2025 Q4 | - | AI, Bonds, equities, global, inflation, infrastructure, policy, rates | - | AI continues to drive productivity and profitability, particularly in the US and Asia. Investment in AI is supporting company performance and roughly 30 leading companies account for 44% of the S&P 500's market value, driven by capital expenditure and R&D spending. German-led defense and infrastructure spending in Europe includes €1 trillion of planned spending on defense and infrastructure. This fiscal stimulus should support mid-cap companies and sectors tied to capital expenditure, construction, and industrial modernization. Central banks took different approaches with the Federal Reserve cutting rates gradually to 3.50-3.75%, ECB holding at 2%, Bank of England cutting to 3.75%, and Bank of Japan raising to 0.75%. Interest rate policies are increasingly driving economic outcomes. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
Infrastructure SpendingPlaying on the continued theme of infrastructure spending, defense and energy sustainability, positions in Industrial and Energy sectors including Oshkosh, Coterra, OSI Systems, and Herc Holdings added positively to performance. |
Defense Energy Industrial Government Sustainability | |
RatesFederal Reserve resumed rate-cutting cycle with first cut since December 2024, signaling resumption of easing. Expected three cuts of 25bps between now and first quarter 2026 as Fed responds to signs of weakness in US labor market. |
Fed Monetary Policy Labor Market Easing Liquidity |
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