This isn’t just another market cycle; it’s a structural shake-up.
I think it’s safe to say that there’s no modern precedent for the current level of global disruption. The pace of change, from retaliatory tariffs to shifting alliances and conflicting official statements, has been unrelenting. Market volatility has returned, coming in sustained waves across asset classes and regions.
This is likely to be more than a short-term dislocation.
The convergence of global protectionism, economic nationalism, and geopolitical tensions has now crystallised into policy. We are entering a world of higher trade barriers, disrupted supply chains, and increasingly unpredictable policymaking. Investors should therefore exercise caution about making short-term calls – what appears rational today could seem irrational a week later.
The key question for investors isn’t whether uncertainty will persist, but how portfolios can be constructed to withstand it. This is not a moment for macro bets or reactionary rotations. Rather, it’s a time for humility, discipline, and a clear investment process.
Much has been said about US exceptionalism, and for years, innovation, deep capital markets, and corporate profitability provided a fertile hunting ground for investors. But recent history highlights the cost of complacency.
In 2022, fixed income faltered, showing a lack of flexibility. This year, global equity trackers, largely proxies for US mega caps, exposed their weaknesses. These strategies thrived when the dollar was rising and tech was booming, but shifts are underway.
2025 has underlined just how fragile the global system has become. However, despite current scepticism towards the US, many of these firms still offer exceptional compounding potential. The key factor is quality, not geography. Where a company is listed matters less than how (and where) it earns revenue.
For us, creating balance in global equities requires purposeful diversification across three focus areas:
- Defensive quality is the ballast, providing stability in tough markets. These companies have strong balance sheets, recurring revenues, and steady cash flows through the economic cycle, offering capital preservation and resilience.
- Durable compounders are the engine, driving long-term growth. These businesses have strategic moats, disciplined capital allocation, and strong reinvestment potential, enabling steady value creation through cycles.
- Selective growth drivers provide optionality and add upside. Focused outside of over-owned mega-cap US tech, these high-potential businesses have sound fundamentals, scalable models, and exposure to structural themes, carefully chosen and appropriately weighted.
Balanced exposure mitigates single-factor or regional risk, enabling portfolios to withstand volatility, compound consistently, and capture opportunities. Importantly, this shape must be flexible, shifting appropriately to manage changing market dynamics.
Quality at the core
In volatile markets, quality is key. The companies that emerge stronger are those with pricing power, low capital intensity, strong governance, and a clear strategic edge.
Quality businesses tend to demonstrate more resilient earnings due to structural advantages, including strong competitive moats, pricing power, and loyal customer bases, which support stable revenues, even in downturns.
Their disciplined capital allocation, lower debt levels, and asset-light models provide greater financial flexibility, while recurring revenue streams create predictability. For investors, resilient earnings mean fewer surprises, smaller drawdowns, and more consistent compounding over time.
Importantly, many of these companies are inherently insulated from tariff-related risks. Our portfolios are skewed towards services-oriented, subscription-based businesses, like software, financials, and consumer services, with limited exposure to capital-intensive sectors like autos, machinery, or commodities.
Robust balance sheets and the inherent resilience of earnings help limit second-order effects from tariff-related economic weakness.
This resilience is already evident in market performance. During tariff-induced selloffs, the fund has experienced smaller drawdowns than the broader market, demonstrating its defensive strength.
Discipline amidst the noise
We don’t know when this latest bout of volatility will subside – no one does – but we do know that markets will likely remain unsettled as trade rules are rewritten, inflation proves sticky, and policies grow more unpredictable. Clarity and discipline will now outweigh speed.
Now is not the time for overconfidence; it’s the time to hold portfolios that can absorb shocks, remain agile, and stay anchored in fundamentals.
Resilience isn’t optional; it’s essential. That said, we remain highly attuned to identifying opportunities and ready to lean into more dynamic exposures, particularly after our defensive holdings have provided effective downside protection.
Written by Clyde Rossouw
Clyde Rossouw is a financial expert.
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