Climate Assets monthly update: Respite, but uncertainty remains

So far, the latest set of corporate results have been mostly positive, however analysts’ expectations have been revised lower. We see the outlook for US stocks as less favourable due to tariff announcements. Valuations remain slightly high, and we expect increased uncertainty to weigh on capital expenditure decisions for businesses while at the same time tariffs will weaken consumer demand. There is also the risk of a continued depreciation in the US dollar. At present a recession is still not being priced into markets, but the risk of one has increased.

On balance, we have become more cautious and modestly reduced our exposure to risk assets during the month, focusing on slightly trimming US equites. We like fixed income investments in the current environment, due to historically high yields on offer and the potential for cushioning a portfolio should stocks take another leg lower. We also find alternative assets attractive due to the macroeconomic backdrop and initiated a modest position in Ardea Global Alpha to target consistent low volatility returns, independent of market direction. The strategy focuses on identifying price inconsistencies among government securities that are closely related.