In the latest Pacific Multi-Asset Solutions Video Update, Freddie Streeter, Head of Global Solutions at Pacific Asset Management, is joined by Pacific’s Chief Investment Officer and Portfolio Manager, Will Bartleet, and Will Thompson, Chief Sustainability Officer and Portfolio Manager. The team discuss navigating volatility through active management and diversification, Trump’s economic policies, with tariffs now taking priority and tactical shifts in China as well as US Equity Exposure.
Video 1: Q2 2025 Market Outlook
Rotation from US to Europe
The team discussed how the US market, after a standout 2024, faced underperformance in 2025 due to high valuations, softer macro data, and policy uncertainty. In contrast, Europe, and Germany in particular, benefited from a surprise €900 billion fiscal stimulus focused on defence and infrastructure. Given Germany’s historically conservative fiscal stance, the team noted this as a major policy shift. As a result, they significantly reduced US exposure and rotated into European and broader global equities.
Video 2: TACTICLE SHIFTS
in China and US Equity Exposure
In Q1, the team actively managed exposure to Chinese technology, a position initiated in early 2024 amid extreme market pessimism. Strong returns followed, driven by fiscal stimulus focused on consumers and China’s dominance in advanced technologies like AI and EV batteries. Despite volatility and US–China trade tensions, the position remains attractive due to continued innovation and a valuation discount to U.S. tech. Meanwhile, in the U.S., the portfolio has shifted away from concentrated exposure to the S&P 500 and the MAG 7, moving instead toward equal-weight and value strategies to capture broader opportunities and benefit from historically low valuations in those areas.
Video 3: US Market and Tariffs
In this section the team outlines Trump’s unpredictable economic policies, with tariffs now taking priority. A surprise tariff hike shocked markets, risking recession and inflation. Market pressure, especially from the bond market, forced Trump to ease measures with a 90-day pause and reduced rates. The team suggest while this temporarily calms fears, long-term uncertainty, inflation risks, and damage to US trade credibility remain high, creating a volatile environment for investors.
Video 4: Navigating volatility
Through Active Management and Diversification
This year has seen the most active use of unitised fund structures in the portfolio’s history, enabling rapid shifts in asset allocation amid fast-moving market events like “Liberation Day.” Equity exposure was quickly reduced ahead of tariff announcements and re-added following a market reprieve, reflecting a flexible, responsive strategy. Beyond equities, positions such as yen trades and inflation-protected bonds (TIPS) were used to hedge risks. With traditional safe havens like government bonds underperforming, diversification has been crucial. Allocations to alternatives, investment trusts, and uncorrelated strategies helped stabilise returns, reinforcing that a dynamic, well-diversified approach remains essential in today’s uncertain environment.
