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

  • The uncertain developments in the first half of the year benefited ERSTE RESPONSIBLE STOCK DIVIDEND, enabling the fund to outperform the broad global equity market.
  • In the fund, we had already responded to these rotations between regions, sectors, and factors in February. First, we significantly reduced the weighting of US equities and sharply stepped up that of European equities at the same time.
  • We took profits on financial shares, which we view positively overall, and which remain our largest sector weighting.
  • We continue to see risks in global equity markets as a whole, as the US economic policy is likely to remain unpredictable and geopolitical risks have recently increased significantly again. Such an environment should support defensive equities with strong dividends.

Fund manager Alexander Sikora-Sickl
(c) Stephan Huger

Fund & Performance

The ERSTE RESPONSIBLE STOCK DIVIDEND is a sustainability equity fund that invests worldwide primarily in shares of selected companies from developed markets. The fund's investment process is based on fundamental business analysis. When selecting stocks, the focus is on companies with high to medium market capitalization, attractive dividend yields and, in the past, relatively low price fluctuations. Investing in stocks of companies, that are pioneers in terms of ecological, social and governance aspects, are crucial for investment decisions.

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.

Performance since start of the fund (1.3.2017). 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 Alexander Sikora-Sickl

What sort of conclusion do you draw from the first half of 2025 on the capital markets?

Global equity markets were rife with uncertainty and volatility in the first half of the year. This was primarily triggered 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 USA. Against this backdrop, the US equity market and the US dollar came under pressure. Mega-caps in the technology sector were particularly vulnerable.

By contrast, European equity markets performed much better, posting strong gains in the first half of the year. Europe benefited from the easing of debt restrictions in Germany, the massive increase in defence spending announced by the EU, and capital outflows from the United States. Overall, this environment was positive for defensive equities, with both dividend shares and low-volatility shares showing relative strength.

This development benefited ERSTE RESPONSIBLE STOCK DIVIDEND and made it possible for the fund to outperform the broad global equity market. The fund had already responded to these rotations between regions, sectors, and factors in February. Firstly, we significantly reduced the weighting of US equities and increased that of European equities sharply at the same time. Also, we built positions in (primarily European) industrial shares, which should benefit from the announced infrastructure investments. We also stepped investments in the healthcare sector. This sector has mostly positive fundamentals and moderate valuations but has recently underperformed the market. We reduced the basic materials and consumer goods sectors slightly and took profits in financial shares, which we view positively overall and which remain our largest sector weighting.

 

What do you expect for the other half?

Looking ahead at coming few months, our models continue to point clearly towards value, high dividends, and minimum volatility in Europe. In the USA, this picture has changed since mid/late April, with growth shares once again in demand, a trend that should continue in the near future. In this situation, we have maintained our positioning for the time being, both in terms of our prominent weighting in Europe and our focus on industrial shares. We continue to view global equity markets as risky overall, as the US economic policy is likely to remain unpredictable and geopolitical risks have recently increased significantly again. Such an environment should support defensive equities with strong dividends.

 

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

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