Discussions regarding customs tariffs and geopolitical tensions were the main focus in the first six months of the year on the financial markets. Where are the markets headed in the second half of 2025?

In our Funds check series, fund managers from selected funds look back on the past year's performance and give their assessment of what we can expect for the rest of the year. (Please note that forecasts are no reliable indicator of future performance and that investing in securities involves risks as well as opportunities.)

Summary

  • ERSTE EQUITY RESEARCH comes with an explicit focus on quality growth, which made the market environment particularly challenging for the fund during the reporting period.
  • We responded to rotations at both regional and factor level in the portfolio and gradually reduced the weighting of US equities while stepping up that of Western European equities.
  • We reduced our exposure to the communications and cyclical consumption sectors, took profits on financial equities, and bought additional shares in the healthcare, consumer non-cyclicals, and energy sectors.
  • In the USA, on the other hand, we can see many indications that the recent trend in growth and quality shares is likely to continue for the time being, which would constitute a positive environment for the fund.

Fund manager Harald Egger
(c) Stephan Huger

Fund & Performance

The ERSTE EQUITY RESEARCH is an equity fund that invests worldwide in the form of a concentrated portfolio. The fund selection is based on the publicly accessible recommendation list of Erste Group Research. Primarily, companies with a "BUY" rating on the recommendation list are considered for investment.

Note: Please note that an investment in securities entails risks in addition to the opportunities described. Past performance is not a reliable indicator of future performance.

The performance is calculated in accordance with the OeKB method. The management fee as well as any performance-related remuneration is already included. The issue premium which might be applicable on purchase and as well as any individual transaction specific costs or ongoing costs that reduce earnings (e.g. account- and deposit fees) have not been taken into account in this presentation.

Commentary by fund manager Harald Egger

How do you assess the first half of 2025 on the financial markets?

Global equity markets were driven by uncertainty and volatility in the first half of the year. This was triggered primarily by Donald Trump's erratic trade policy, whose tariff announcements led to massive price fluctuations at times. The unclear and erratic tariff policy fuelled economic fears as well as concerns about a rise in inflation in the United States.

In this scenario, the US equity market and the US dollar came under pressure. Mega-caps in the technology sector were particularly weak. The Chinese AI tool DeepSeek presented in January caused many investors to doubt the ambitious valuation levels of US tech companies. By contrast, European equity markets performed much better, posting strong gains in the first half of the year. Europe benefited from the easing of Germany's debt brake, the massive increase in defence spending announced by the EU, and capital outflows from the USA. However, the environment for growth and quality shares remained difficult in Europe as well.

 

How did the fund perform in that environment?

ERSTE EQUITY RESEARCH has an explicit tilt towards quality growth in its fundamental approach. In this context, the fund is generally heavily weighted in the USA and there, particularly in the US technology and communications sectors. The market environment was correspondingly difficult for the fund during the reporting period, with the portfolio recording a YTD loss of around 7.3%.

We responded to the rotations in the portfolio at both the regional and factor level and gradually reduced the weighting of US equities from almost 75% at the beginning of the year to around 71% in the first quarter and further to around 66% in the second quarter. Conversely, we continuously increased the weighting of Western Europe from around 15% to just under 26%. At sector level, we briefly reduced technology shares by a significant degree. Following the signal from our factor models pointing towards growth in the USA in April, we then re-weighted the sector again. By contrast, we reduced the weighting in the communications and cyclical consumption sectors in recent months and took profits in the financial sector. We increased our holdings in the health, consumer non-cyclicals, and energy sectors.

 

What do you expect for the coming months?

Looking ahead to the coming few months, our models continue to point clearly towards value, high dividends, and minimum volatility in Europe. In the USA, however, there are many indications suggesting that the recent trend in growth and quality shares is likely to continue for the time being. This would be a positive environment for the fund, which is positioned in the growth sectors of technology and communications with around 37%, three-quarters of which is located in the USA.

 

Please note: investing in securities involves risks as well as opportunities.

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