Welcome to this month’s edition of the True Potential Monthly Report.
In this update, we look at what’s been happening in markets and the wider global economy, and what it could mean for investors.
Here are the key themes this month:
- Financial markets and consumer spending remain strong.
- Given improving financial conditions, interest-rate cuts and President Trump’s spending plans, the US economic outlook looks strong.
- Lower prices, rate cuts and fiscal stimulus should keep European growth positive too.
- US companies continue to show strength and adaptability, though some areas look fully valued.
- We have a modest preference for equities over bonds and see opportunities outside the US. In fixed income, we see some value in UK government bonds, despite political and fiscal pressure.
Market overview
Investors remain in a confident mood – as reflected in the record highs seen in many equity markets. Despite recent tariff headlines, the impact on consumer prices has been limited, and consumer spending remains strong. Meanwhile, companies have innovated to safeguard their profit margins and reorient their supply chains. We still expect tariffs to have a modest impact on economic activity, but markets appear comfortable with the outlook.
United States
The outlook for US economic growth in 2026 remains strong. The effects of the administration’s trade policy are being positively offset by extraordinary investment in AI, the country’s unique productivity impulse and healthy corporate profits. Improving financial conditions, lower interest rates and Trump’s spending plans provide further support.
Europe
We still expect European economic activity to strengthen, given the disinflationary effect of lower energy prices and excess Chinese goods, which are helping to mitigate the effects of US tariffs. Lower interest rates and increased government spending (especially in Germany) provide further positives.
Equities and valuations
Equity valuations currently look stretched in some areas. But there are significant variations between regions and within markets – especially in the US. While non-US markets appear better value overall, US companies have consistently shown an ability to adapt and innovate – a key reason why investor confidence remains strong.
Portfolio positioning
We continue to hold a modest preference for equities, with a preference for stocks listed outside the US. However, we remain alert to the need for companies to deliver earnings that justify their current valuations. Government and corporate bonds currently offer only limited value; here, UK gilts are more attractive than US Treasuries, despite the UK fiscal outlook. Given the risk of higher short-term inflation and bigger fiscal deficits, prudent selection is required in alternatives, where we continue to take a neutral stance. We prefer to be underweight in cash.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest.
This material is not a personal recommendation or financial advice and the investments referred to may not be suitable for all investors.
Opinions, interpretations and conclusions represent the views of True Potential Investments at the date of publication and are subject to change. Forecasts are not a reliable indicator of future results.
All data sourced from Bloomberg L.P. (30/10/2025)
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