Market and Asset Allocation Update – October 2025
CiN-sights Asset Allocation - October 2025
Dynamic Asset Allocation Calls (Quarterly view)
Thought
We don’t have to be smarter than the rest. We just have to be more disciplined - Warren Buffett
Thoughts
Australian Equities: We have little conviction here of the Australian market outperforming. It has done well despite a lacklustre reporting season, falling equity yields and poor domestic productivity. Sectorally, it is hard to see Financials maintaining valuations and Resources (outside of precious metals) are not seen as a quality alternative. Liquidity and momentum support, but we become very sector and stock specific in focus and prefer to swim in the waters ex ASX50 and now move our small cap weighting to overweight.
US Equities: A good reporting season, favourable fiscal and monetary policy, momentum and receding fears on tariff impacts have all combined to buoy markets. At worst, a soft-landing economic scenario is unfolding with recession fears evaporating. We see AI fuelled sentiment continuing from here, albeit some of it irrational, with stretched valuations keeping our overall weighting capped at neutral. With all the positive factors above as a backdrop, we become more confident of small caps closing some of the valuation gap to the S&P 500, especially if Trump can engineer lower rates.
European Equities: With the initial switch to Europe from the US closing the valuation gap, we now move back to Neutral. The Euro market is more a story of Financials and Industrials, so no Tech uplift. Yes, some defense inspired budgetary stimulus helps, but the economic and political framework remains sclerotic (vis a vie France), and it is hard to remain overweight on a sustained basis.
Emerging Markets: We now see the EM complex offering a better risk/reward proposition. The limited (so far) impact of Trump tariffs and a weaker USD, cheaper valuations etc. but country and region selection is important with India off the boil and China gaining attraction.
Property: Lower bond rates, reasonable economic prospects and the sheer cost of replacement points to support. We agree but picking specific sectors and properties remain key here. We still prefer Unlisted.
Private Equity: The market continues to remain split on the attractiveness of PE and of late, secondaries. We remain comfortable that, over time, indigestion will sort itself out with emphasis on the time element. PE Manager/LP selection is critical where payoffs between top and bottom performers is wide.
Infrastructure: We continue to see attractive opportunities in the sector and look to allocate to private market vehicles vs listed equities. Inflation linked assets will remain preferred.
Gold: We keep looking for the point where we dial back our exposure, but broad-based buying, especially by Central Banks, keeps us Overweight and thus our position continues to be carried by the momentum. Some silver and other precious metals exposure is also warranted.
Government Bonds: With long rates having rallied and short rates having factored in as many rate cuts that we can envision, we now dial all FI settings to Neutral. Falling yields in long duration is being offset by term premium increase, anticipated issuance volumes and inflation expectations. Short rates are predicated on lower GDP and higher unemployment which are not yet weak enough to warrant falls in yields.
Private Credit: Yes, spreads are tight, but until we get some serious deterioration in credit conditions they will continue to grind away at these lower levels. For fixed rate credit, solid outright yields attract and for floating rate exposures, whilst narrow, still offer more attractions than other yield assets. Despite adverse publicity, the sector will still expect to be a net recipient of new client monies – a sectoral factor.
Cash: With cash rates close to the bottom end of the forecast range, we look to deploy into select equity and alternative markets
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