MPS QUARTERLY UPDATE

In a world that changes quickly, our best defence remains a diversified investment strategy—our multi-asset approach. A saying we often use in the office is: “If there’s nothing you dislike in your portfolio, it probably isn’t diversified enough.” This is a reminder that different parts of the portfolio will behave differently, and that is a good thing.

So far this year, some of last year’s strongest-performing investments have lagged, while some of the weaker ones have come back into favour. This mix is exactly what we aim for—while not everything moves in the same direction, we can still point to solid areas of performance, even in a tough market.

A US recession is not our base case, but it is more plausible than it was earlier this year. US shares have bounced back from earlier losses, but in sterling terms, returns remain negative due to the weaker US dollar. We remain underweight US equities in your portfolio due to high valuations, tariff risk and slowing growth.

Here in the UK, the Bank of England has started cutting interest rates, but inflation—particularly wage inflation—remains stubbornly high. We will avoid commenting on the rights or wrongs of government policy, but it is clear that current spending plans are ambitious and will likely require future tax rises. Without major spending cuts, this is unavoidable. Despite this, UK assets remain cheap, M&A and share buybacks are improving and consumer have lots of excess savings to be spent. Despite the doom and gloom in the media, UK large caps have returned double digits (including dividends) so far this year.

After a long period of underperformance, Europe is showing signs of life. It is benefiting from a shift in sentiment away from the US, falling inflation, lower interest rates, and rising government spending—particularly in Germany, which is now investing in defence and infrastructure. The region remains attractively valued, and we have increased our exposure accordingly.

Alternative Income has been the standout performer this year. After a period of weakness, the asset class has rebounded well, helped by market volatility and falling interest rate expectations. We are also seeing more corporate activity—companies returning capital to shareholders—which is a welcome sign. Yields remain attractive, and we continue to view this area positively.

So, where do we go from here? In a word: cautiously. The world has changed. The ultra-low interest rate era is behind us, and globalisation is being replaced by a more fragmented, inward-looking world order—led by an “America First” stance that will likely shape the decade ahead. As always, the key is diversification. That remains central to our investment philosophy—and to protecting and growing your wealth in a changing world.