December 2025 Update

December, 2025

Try and remember what a substantial sell-off feels like!

We almost had the expected Autumnal retracement but then didn't. Global equity markets finished November essentially flat after a rally late in the month. The Global Diversified Trust rose almost 1% and the Global 30 portfolio, a more value biased and concentrated strategy rose about 4%. We got lucky in that some of the biggest positions in the Global 30 had very strong returns. NGK Insulators and Kajima in Japan for example gained over 15% each.

We made a small number of trades in the global strategies investing in Hong Kong Exchanges and taking profits in Ebara and Ibiden in Japan.

The US consumer looks to be under serious pressure and warning signs are flashing everywhere from delinquencies in Auto Loans, Student Loans, and Credit Card debt.

The intention of this administration is to favour Main Street over Wall Street but unless there is more private sector capital expenditure and hiring in the next 6 months then this won't be happening before the mid-terms. The Fed sure is going to be under pressure to cut and given the Big Beautiful Bill is quite stimulative it makes sense to us to hold reflation trades. There'll be a chance to buy a lot of US bonds and the yield curve will get steeper either due to funding pressures or higher growth. Meanwhile Wall Street drives the Mag 7 to be over 33% of the S&P 500, both unprecedented and probably unwise. Try to remember what a substantial sell-off feels like!

We remain underweight these 7 since they are expensive and large already and trees don't grow to the sky. This has not hurt performance where we find equally attractive 'true technology' investments in Japan and have made good returns from those.

The chart below compares Ibiden 4062 (recently sold), Sumitomo Electric Industries 5802 Meta and even Nvidia. The Mag 7 should not be the only game in town or in your portfolio.

News from Europe continues to astound. Economic and social self-harm appears to be the objective of EU policy although some sort of U turn manoeuvres especially on energy are being discussed. The UK looks to be headed to oblivion and the last Budget hasn't helped. We get (and applaud) the intention to reduce the disparities between income and wealth cohorts and rebalance the relationship between asset prices and incomes but "you don't make poor people rich by making rich people poor". Ack. W.C.

Until the Keynesian Kommunists are removed from decision making this relative economic trajectory of Europe down and RoW up, will continue. As a reminder the KKers believe that:-

• Tax increases up to 100% always increase government tax take
• Public spending from this increasing tax take produce productivity gains as large as private sector investment achieves
• All profit belongs to the government; all economic activity is thanks to the government ergo more government is good

Meanwhile Japan and China continue to grow while they face-off and the new Japanese Prime Minister has clearly made it obvious that Japan is relevant economically, as a defence partner to the US in the Asia Pacific, and as the largest holder of US debt, relevant financially. We expect the BoJ to hint at raising rates and the risk to markets is a Yen spike up which will cause forced closure of the Yen carry trade supported positions. We remain overweight Japan and expect the consumer to start spending in Asia as real wage growth is being realised, unlike elsewhere.

We are, we believe, quite defensively positioned, but fully invested.

Delft Partners December 2025