Climate Assets monthly update: A strong month underpinned by surprising market resilience

Stock markets have demonstrated an impressive resilience of late, despite increased tariffs and heightened uncertainty. In particular, our Climate Assets Funds had a solid month, with returns of +3.3% and +4.4% for the Balanced and the Growth funds, respectively.

Hard data, such as employment figures and consumer spending, is inherently slow to reveal weaknesses. Until we see a significant softening in this area, it remains unclear whether a worrisome slowdown is taking place. Much like the tariff levels, there is a rising sentiment that both the best- and worst-case scenarios will be avoided, allowing economies to navigate through and maybe avoid recession, albeit with lower growth. However, the currency dynamic between the US dollar and the pound is as important for the Funds as global growth given their significant regional exposure to the US.

The pound has appreciated to its strongest level versus the US dollar since February 2022, when Russia’s invasion of Ukraine drove up inflation, and is up around 9% year to date. This appreciation has provided headwinds for UK investors in the US, however, should the pound depreciate, this would turn into a tailwind.