Steering a path through global turbulence

Global equity markets have demonstrated a degree of resilience in the first half of 2025 in the face of some significant challenges. To date, markets have shrugged off tariff concerns, geopolitical tensions, and an uncertain economic environment. However, this optimism may not last indefinitely, as the implications of recent policymaking become clearer. It is an environment in which investors need to tread carefully and diversify effectively.

The backdrop for global stock markets remains highly complex and uncertain. Although many indices have posted gains for the year to date, the journey so far has been far from smooth, marked by intermittent bouts of volatility, shifting macroeconomic signals, and persistent geopolitical tensions. It is difficult to shake off a sense of complacency in parts of the market, which appear barely to acknowledge the various risks.

In particular, the US remains a source of uncertainty. The most immediate questions are around tariffs. Trade relations also remain fragile. While some progress has been made on bilateral agreements, tariff implementation is still capricious and a tool for political point-scoring. The potential for renewed trade disputes – particularly between major economies – could reintroduce inflationary pressures and complicate the policy outlook for central banks.

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Although tariffs have not yet shown up significantly in the inflation data, it remains a risk. Front-loading has clouded the data and companies are starting to report pricing pressures. Walmart, for example, warned that US tariffs are driving up its costs and squeezing margins. It said it would ultimately have to raise prices to offset these costs. While markets appear to have assumed that tariffs are a non-event, companies are telling us otherwise.

There are also questions over the fiscal trajectory of the United States. Persistent deficits and rising debt levels may eventually lead to higher long-term interest rates or renewed political brinkmanship, both of which could unsettle markets. The ‘One Big Beautiful Bill’ appears likely to raise the deficit still further, while attempts to cut spending have proved largely unsuccessful.

The impact of index concentration

These issues would be less pressing for equity investors had the US not become such a dominant part of global indices in recent years. The FTSE All-World Index, the reference index for Murray International Trust (MINT) until 1st July 2025, has 64% in the US. Nvidia now commands a market capitalisation of over $4 trillion, larger than the whole of the UK market. Index-led investors are highly exposed if the US wobbles. The US economy has shown remarkable resilience, but these are risks that should be acknowledged and reflected in pricing. Parts of the global stock market, and the US in particular, look priced exclusively for an upbeat outcome that – we believe – is far from inevitable.

We have structured the MINT portfolio to be more attuned to these risks. Our weighting in the US is less than half that of the FTSE All-World Index, at 29.5%, and we largely stay clear of the AI-focused mega caps which pay no or very low dividends. That is not to say that we don’t believe that AI is a strong theme, but we prefer to play it through alternative shares such as TSMC, Broadcom or BE Semiconductor which also contribute on the income side. We have also been diversifying our technology exposure more recently, taking a position in Indian IT Service company, Infosys.

We also believe diversification is vitally important in an uncertain environment and the MINT portfolio has no significant sector skews. Technology is the largest weighting at 19%, but the portfolio also has meaningful weightings in financial services, healthcare and consumer defensive companies. Having a balance of sectors, and diverse regional exposure should help defend our investors’ capital.

Income resilience

Equally, the protective power of income has often been overlooked in the all-out pursuit of growth. We believe income may become a more desirable attribute as investors look for predictable returns in an uncertain climate. In particular, the power of growing dividends to protect investors against inflation shouldn’t be underestimated. Higher inflation remains a risk across most major markets.

In contrast to the volatility in share prices, the income picture, both in terms of the MINT portfolio and more generally, remains stable. In the first half of 2025, the portfolio's total income increased by £6 million to £52 million, up 13% compared to the first half of last year. Of the 25 companies in the portfolio that have declared full year dividend intentions, 22 increased their full-year dividend distributions, with TSMC, Telkom Indonesia and Siemens increasing their dividends by 27%, 19% and 11% respectively. This helps give ballast to the portfolio and may explain why the portfolio has shown robustness during the bouts of volatility that we have experienced this year.

The resilience is also a function of our approach. We are clear-sighted in our analysis of companies, aiming not to get caught up in the ‘noise’ of markets. We believe this will serve us well should markets retreat from their rose-tinted view of the global economy to a more realistic assessment of the risks.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Important information

Risk factors you should consider prior to investing:

• The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
• Past performance is not a guide to future results.
• Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
• The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
• The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
• The Company may charge expenses to capital which may erode the capital value of the investment.
• Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
• There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
• As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
• With funds investing in bonds there is a risk that interest rate fluctuations could affect the capital value of investments. Where long term interest rates rise, the capital value of shares is likely to fall, and vice versa. In addition to the interest rate risk, bond investments are also exposed to credit risk reflecting the ability of the borrower (i.e. bond issuer) to meet its obligations (i.e. pay the interest on a bond and return the capital on the redemption date). The risk of this happening is usually higher with bonds classified as ‘subinvestment grade’. These may produce a higher level of income but at a higher risk than investments in ‘investment grade’ bonds. In turn, this may have an adverse impact on funds that invest in such bonds.
• Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.
• The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.

Other important information:

The details contained here are for information purposes only and should not be considered as an offer, investment recommendation, or solicitation to deal in any investments or funds and does not constitute investment research, investment recommendation or investment advice in any jurisdiction. Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use with Aberdeen. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Aberdeen, or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates.

The Murray International Trust PLC Key Information Document can be obtained here.

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. The company is authorised and regulated by the Financial Conduct Authority in the UK.

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