We have highlighted an environment defined by elevated uncertainty and shifting investment dynamics. Persistent inflation volatility, complex geopolitical tensions, and structural shifts across asset classes mean traditional assumptions about diversification and risk mitigation no longer fully apply. Agility and proactive asset allocation are paramount.

In the macroeconomic landscape, global disinflation continues, but remains uneven, with services inflation notably sticky in the US and Europe. Central banks are pivoting cautiously, with the Fed unlikely to cut rates before Q4, while emerging markets move forward with easing cycles. Against this backdrop, traditional bond portfolios offer limited downside protection compared to historical norms. We are following a tactical approach to bonds, favouring moderate duration and exposures to short-dated credit, leveraging attractive yields.

Within equity markets, we have observed clear evidence of a structural rotation away from the US despite short-term rebounds, together with the growing risks tied to US mega-cap concentration with the ten largest stocks, (that are at historically elevated valuations), comprising nearly 40% of S&P 500 market cap. Meanwhile, Europe and Japan present some optimism around fundamentals, attractive relative valuations, and underappreciated cyclical recovery potential.

Emerging Markets, particularly in Asia, benefit from supportive policy cycles, attractive valuations, and structural tailwinds related to global supply chain diversification. We are actively positioning our funds to capitalise on these longer-term structural shifts.

We highlight that macro strategies remain vital to portfolio resilience. The next several quarters present substantial geopolitical risk, especially around US policy, Middle East tensions, and fragile China-US relations. We are carefully managing these risks through tactical macro positioning—maintaining flexibility, incorporating tactical hedges, and ensuring portfolios remain responsive to changing conditions. Gold has become increasingly important, offering essential protection against both inflation volatility and geopolitical uncertainty. Our current stance involves selectively integrating gold exposure where appropriate as an additional risk mitigation measure.

This all means an ongoing commitment to active risk management, selective and tactical asset allocation, and a sharp focus on emerging structural opportunities. We remain vigilant and flexible, adjusting exposures proactively to navigate volatility, capture growth selectively, and protect your wealth in a shifting and uncertain global environment.

We trust you have enjoyed and benefited from this report and please do not hesitate to contact Orion Investment Managers at: info@orionim.biz should you have any questions or queries.

Sincerely,

Adrian Meager
Orion Investment Managers
Managing Director and Chief Investment Officer